News

Private Equity firm KKR admit to making ‘fatal mistakes’ with the management of TDC, the former national telecommunications operator in Denmark. Mr Oliver Haarmann, board member of KKR, last week addressed the Danish Venture Capital and Private Equity Association (DVCA) at their annual meeting and confessed that forcing TDC to go to court, to try and force the sale of shares from minor share holders, was a ‘fatal mistake’. In addition to this error, he also admitted they should have been more open with the Danish public about their strategies and visions for the future of the company.



“My appearance here today is a signal to you and the public, that we will be more open in the future” says Mr Haarmann.



Trade union leader of Danish union FTF, Bente Sorgenfrey was invited for the first time to attend the meeting with the DVCA, as a symbol of opening dialogue. Employees of TDC, minor shareholders and union Dansk metal are pleased to hear the apologies from KKR and this gesture of good will, having spent large resources defending their right not to sell their shares.



KKR is one of 5 international private equity funds that formed a conglomerate to take over TDC in a leveraged buyout, in February 2006. The group of 5 operate under the name ‘Nordic Telephone Company’ or NTC, and include buyout companies KKR, Apax Partners, Blackstone, Permira and Providence. When the buyout occurred, NTC failed to secure the mandatory 90% share ownership it needed to legally de-list it from the public domain. Mr Haarmann is admitting that the actions that followed on the instruction of NTC, to force minor share holders to sell and to take on the Danish court system, was a huge error. NTC lost the challenge in court, appealed the case, and lost again.



Minor shareholders, who were in large part a pension fund, won the court challenge which maintained TDC’s status as a public company. This meant that the firm is still subject to regulatory obligations which offer greater protection than if the company was taken private. However it did not prevent the company being piled with debt and regressed as a market leader. Vice President of Dansk metal, Bo Larsen, was involved in the activities to defend the employees and shareholders. Mr Larsen condemned the actions of NTC in their management of TDC at a press conference held last week in Munich to coincide with the private equity run ‘Super Returns’ conference.



UNI Global Union organised a lobby at the entrance to the private equity conference in Munich to get the attention of buyout firms and wake them up to their unethical ways of operating. TDC was exampled at the press conference as one of the many case studies in the private equity hall of shame.



“KKR admitting to poor practise indicates that they are beginning to consider how they operate in communities. This may well lead to a willingness to open up dialogue with those affected by their operations, such as employees and their representative unions. This is what we are asking them to do” comments Philip Jennings, General Secretary of UNI Global Union.



TDC now runs as a second rate company heavily laden with debt, having once been a leading name in European telecoms.