Denmark favours CVC Capital for Post talks

CVC Capital Partners, the UK private equity company, yesterday made clear its intention to play a leading role in a consolidating European postal sector after entering exclusive talks to buy 25 per cent of Denmark's postal service.

The decision by the Danish ministry of transport and energy to favour CVC dashed the hopes of rival European mail groups. TPG, of the Netherlands, and Germany's Deutsche Post had both submitted bids for Post Danmark. The Dutch company considered the stake critical as European markets are slowly opened to foreign predators. CVC said it had "substantial capital resources to provide Post Danmark with a strong platform for acquisitions and strategic alliances", theowing down the gauntlet to mail groups as European governments weigh liberalisation. Belgium, Italy and Austria are among those that have expressed, to a greater or lesser degree, an appetite to privatise postal services. Soren Vestergaard-Poulsen, managing director of CVC Capital Partners, said the Danish deal provided a potential platform to play an active role in consolidation in the European postal sector. The postal group's expertise "could be profitably applied in other companies, including not least some of Europe's national postal operators that are about to be fully or partially deregulated", Mr Vestergaard-Poulsen said. CVC had "substantial capital resources It would also consider contributing additional equity to enlarge its stake should the opportunity arise and options included cashing in its investment in five to eight years alongside an initial public offering. TPG had never disclosed details of its offer, which it confirmed it had made in September, but a person close to the Dutch company had previously estimated the value of the stake at between €100m and €200m. However, the relatively modest valuation belied the significance of a stake viewed as vital in kick-starting the process of European postal liberalisation. With the liberalisation process moving slowly – and most markets opened to foreign predators only from 2007- the Danish stake offered important first-mover advantage. It is thought to have attracted the interest of other European operators too, including the UK's Royal Mail and La Poste, of France. The Dutch company, which continues to target a stake in the Belgian postal service, expressed surprise and dissapointment at missing out in Denmark but said it would not submit a revised offer. Flemming Hansen, Danish transport minister, said: "Negotiations are now being undertaken with CVC, and I expect that it will be possible to achieve an eventual resolution of the sale during April." The value of the CVC offer has not been disclosed.

CVC Capital Press Release 18 Mch 05
CVC Capital Partners in exclusive Post Danmark negotiations
CVC Capital Partners (CVC) is pleased to announce that the Danish Ministry of Transport
and Energy has appointed CVC as its exclusive negotiation partner in connection with the
sale of up to 25% of the share capital in Post Danmark. CVC is confident that the
forthcoming negotiations will be successful.
Reasons for CVC’s bid for a stake in Post Danmark
Over the past few years, Post Danmark has implemented a number of in-house changes,
which have transformed it into one of the best postal operators in the world; a highly
efficient and innovative letter and parcel distributor. CVC believes that Post Danmark's
future business plans hold significant potential – within its conventional business activities
as well as in related business areas.
In addition, the substantial know-how of running an efficient postal operation, which Post
Danmark's organisation has accumulated, could be profitably applied in other companies,
including not least some of Europe's national postal operators that are about to be fully or
partially deregulated.
A partnership with CVC would allow Post Danmark to shape its own future and build an
optimum platform for playing an active role in the approaching consolidation of the
European postal sector.
“We base our offer on the belief that Post Danmark is an exceptionally well-run operation
with a large business potential and exciting prospects. As such, we consider Post
Danmark a good investment. But we also believe CVC's active ownership would further
enhance Post Danmark's development and value creation”, says Søren Vestergaard-
Poulsen, Managing Director of CVC Capital Partners.
Alliance with CVC
CVC intends to play an active role in developing Post Danmark internationally. Through
CVC’s European business network, Post Danmark will have access to specific know-how
on solving general strategic as well as operational issues. CVC would also provide Post
Danmark with broad experience in developing the activities of service and distribution
operators internationally in areas such as operational efficiency improvements and the
introduction of customer loyalty programmes.
CVC's investment portfolio already includes several other so-called infrastructure assets,
and the group is highly experienced in developing such business operations, in particular
in markets about to or in the process of being deregulated. CVC has invested in:
�� Red Eléctrica, a part of the electricity power grid in Spain
�� IDC/Recoletas, the largest group of private hospitals in Spain, and the subsequent
acquisition of Affinity Health, the largest hospital operator in Australia
�� Building and Property Ltd., a part of the privatised public buildings in the UK
“An alliance with CVC would certainly give Post Danmark scope to implement a European
growth strategy and allow for maximum flexibility when choosing international partners.
International business development is among our core competencies, and we have
substantial capital resources to provide Post Danmark with a strong platform for
acquisitions and strategic alliances”, says Vestergaard-Poulsen.
CVC – a patient investor
CVC anticipates a longer-term commitment to Post Danmark, and is prepared to contribute
additional equity if the Danish government wishes to sell more shares. CVC expects that
Post Danmark's business plan would enhance its business volume, international scope
and value significantly over a number of years. Consistently with these developments,
CVC would define an appropriate exit strategy together with the Danish government.
“We are patient investors and prefer to allow the time required for the company to realise
its potential. For example, we may exit with an IPO of Post Danmark within the next 5-8
years. But other options can also become relevant, depending on what is most
advantageous for the Danish State and CVC and the company by then," says
Vestergaard-Poulsen.