(Bloomberg) -- BT Group Plc’s new chairman Adam Crozier’s first move may be to barricade himself inside the boardroom at its new headquarters.
After a month on the board of Britain’s biggest phone company, Crozier will start as chair Wednesday. He’ll need to get straight to work preparing for a potential takeover bid for BT, a move that top executives and advisers expect could come as soon as the next few months, according to people familiar with the matter.
The London-based group has already brought on U.K. advisory firm Robey Warshaw and Goldman Sachs Group Inc. as defense advisers after French billionaire Patrick Drahi dramatically revealed a 12.1% stake in June, making him its biggest shareholder overnight.
U.K. takeover rules preventing the telecommunications tycoon from increasing that stake expire on Dec. 11, and BT is preparing for the possibility that he buys more shares on the open market or builds his position suddenly via derivatives, like he did with his initial stake, one of the people said.
That prospect means the company has been tightening its defenses, including change-of-control clauses for its debt, Bloomberg News reported earlier this month. Meanwhile Drahi moved more money into the U.K. company which holds BT shares in recent weeks.
Crozier, a former chief of Royal Mail Plc and broadcaster ITV Plc, arrives at a time of upheaval and vulnerability for former state telecom monopoly BT, which has just left its historic offices by St. Paul’s Cathedral in the City of London.
Its shares have fallen more than 50% in the last five years, thanks to competition, Brexit, an accounting scandal, and regulation including the ban of key 5G wireless supplier Huawei. So the board may find it difficult to advise against a generous premium if one is offered, one of the people said.
Since taking his stake, Drahi has met BT’s top executives and quizzed them about growth plans, according to a person familiar with the matter. In its most recent results BT made a point of highlighting its progress in slashing costs. They remain higher than competitors but that may help preempt one of Drahi’s favorite tactics at his target companies.
Representatives for BT and Altice declined to comment.
BT may attract interest from further afield, too. On Sunday the Economic Times newspaper reported rival billionaire Mukesh Ambani was mulling a takeover or other investments in BT through his conglomerate Reliance Industries — although Reliance denied the story.
Meanwhile BT’s second-largest shareholder Deutsche Telekom AG, which holds 12%, has openly fanned speculation, with CEO Tim Hoettges saying he expects change in the coming year and he could be a “king maker”. He acquired the BT stake at several times its current value after DT sold its half of mobile carrier EE, so the bar for him to net a return is high.
Private equity could also make a tilt. Their appetite for telecoms assets is growing, shown by KKR & Co. Inc.’s attempted $12.2 billion takeover of BT’s Italian equivalent Telecom Italia SpA. The Mail on Sunday newspaper reported private equity firms’ valuations of BT’s infrastructure unit Openreach alone had reached 40 billion pounds ($53 billion), more than double the group’s total market capitalization. And CVC considered a takeover of BT last summer when its valuation hit an 11-year low, Bloomberg News reported.
BT’s management also has strong links with private equity. Crozier is also chairman of Kantar, the market research firm bought by Bain Capital two years ago. That Bain connection is deepened by BT CEO Philip Jansen’s continuing role as a long-time adviser to the firm following his successful stint at WorldPay, while his brother Chris also serves under Crozier as Kantar’s new CEO.
Bidders may focus on BT’s fiber optic infrastructure, as similar digital infrastructure assets currently fetch high valuations. Although BT has historically opposed carving out its network division Openreach, Jansen has said he was “open-minded” about how to fund its rollout. However BT recently abandoned a search to find a joint venture partner for Openreach’s rural rollout.
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