KKR [NYSE:KKR], Stonepeak and Global Infrastructure Partners (GIP) are among parties eyeing an investment in Vantage Towers [ETR:VTWR] as Vodafone [LON:VOD] plots selling part of its stake in its listed tower vehicle, sources familiar with the situation said.   

Vodafone has begun discussions with investors over a sale of part of its 81% stake in the tower company, five sources said. The sale process, which is expected to draw interest from low cost of capital investors, is tipped to accelerate in September and has so far drawn the interest of a handful of parties, one of these sources added.   

The FTSE 100 telco, which is working with UBS and Robey Warshaw on the process, has yet to determine the size of the stake on offer, three sources said. 

KKR, Stonepeak and GIP are thought to be mulling forming a consortium to mount an approach, two sources said. The parties, which combined to bid for a stake in Deutsche Telekom’s [ETR:DTE] tower company GD Towers, could utilise their previous preparation and knowledge of Europe’s tower markets to bid for a stake in Vantage, four sources said.    

Deutsche Telekom ultimately sold a 51% stake in GD Towers to DigitalBridge and Brookfield Asset Management at an enterprise value of EUR 17.5bn. 

Gaps in valuation expectations between prospective bidders and Vodafone could be a potential stumbling block, with the telco looking to peg the valuation to GD Towers' at 27x EBITDA after leases (EBITDAaL), one of the sources said.    

Vantage Towers, which has operations across ten European countries, has a more diverse geographic footprint compared to GD Towers, which could account for a discounted valuation, suggested another of the sources.  

Vantage trades at an EV/EBTIDAaL multiple of 21x, according to Dealreporter analytics*. Italian peer INWIT [BIT: INW] trades at 23x for the 12 months through 30 June 2022.

Cellnex [BME:CLNX], which was among the strategic suitors for GD Towers, could be among the strategics to look at the stake sale, one of the sources said. An additional source added that it was too early to determine Cellnex’s level of interest given the lack of current information on the structure. Cellnex could also face competition hurdles given its tower assets in Spain and Ireland where Vantage Towers also operates, according to the first source.    

Orange's [EPA:ORA] tower company TOTEM, which was previously reported to have shown interest in a deal with Vantage, is unlikely to be interested in the current process and would only likely pursue a wider consolidation play in the future, two sources said. GD Towers could also pursue a deal with Vantage Towers as part of a wider consolidation play once its deal with Brookfield and DigitalBridge has been completed, one of the sources suggested. Vantage Towers was among the reported bidders for a stake in the German tower portfolio before dropping out ahead of the binding bid stage.   

Vantage Towers was reported earlier in the year to have received unsolicited offers from several infrastructure funds including Brookfield and GIP, which were exploring a majority stake valuing the business at around EUR 15bn. The tower company, which operates 83,000 macro sites across 10 European markets, saw adjusted EBITDAaL rise 4.6% from EUR 830m in FY20 to EUR 865m in FY21, according to the company’s annual report. Revenues grew from EUR 970m to EUR 1bn year on year. 

Vodafone, UBS, Robey Warshaw, KKR, Stonepeak, GIP, Cellnex, Orange and Deutsche Telekom declined to comment. Vantage Towers did not respond to requests for comment.

*After adjusting for the market value of Vantage’s 33.2% stake in Inwit and its 50% shareholding in its UK tower joint venture with Telefonica [BME:TEF], assumed to be worth EUR 2bn