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6 September 2004

£20 million buy-out of Euphony Communications led by Investec and Penta Capital

A buy-out team led by Investec and Penta Capital today announce the acquisition of Euphony Communications, Europe's leading Network Marketing based telecoms company for a consideration of £20 million. Acquisition finance worth £8 million was provided by Investec Growth Finance and Penta Capital has invested £8 million of private equity. The remaining £4 million was provided by management and vendors. The acquirers were advised by Investec Investment Bank.

Euphony is one of the leading European telecoms providers offering fixed and mobile services to residential and small business customers, with a turnover of £81.6 million in 2003. Euphony Communications was established in January 1998 and now has operations in the UK, Belgium, Ireland, the Netherlands and Germany. It has 336,000 active customers, almost 80% of whom are residential and over 70% of its customers are Carrier Pre-Select.

The deal was led by Giles Redpath, who will become the CEO of Euphony Communications. Redpath was formerly CEO of Alpha Telecom which was bought by Tele2 for £60 million in 2003 and Vice-President, Europe of Telegroup Inc. He founded FASTNET, the first intra European call-back company in 1992.

Giles Redpath, CEO of Euphony Communications said: 'with competition amongst infrastructure providers at an all time high throughout Europe, Network Marketing is about to come of age. Euphony has over 13,000 agents selling utility services through personal contact and referral. The company's growth of 40% year on year for the last 5 years validates the effectiveness of network marketing in competitive markets The support received from both Investec and Penta Capital has been first class and provides a solid foundation for Euphony's ongoing expansion.'

David Calder, Director Penta Capital said, "We are delighted to be backing a first class team and are excited by the growth opportunities that Euphony's strong network marketing model offers."

Leon Blitz, Head of Growth Finance at Investec Private Bank said, 'This transaction highlights our ability to move quickly to become involved in a complex deal led by an experienced entrepreneur. The buy-out of Euphony is our second transaction in as many months in the high growth telecoms sector. It showcases our ability to offer clients a combination of investment banking and growth finance expertise.'

Chris Godsmark, Director of Investec Investment Banking said, "The acquisition of Euphony demonstrates the growing M&A activity in the residential and small business telecoms space. We were hugely impressed by Giles' track record and the opportunities to further improve the already impressive performance of Euphony."

Investec Investment Bank is the leader in UK mid-market communications transactions, this is their 7th telecommunications deal so far this year. Other deals include Eurocall, PSInet UK and PFInet Europe, Kingston inmedia, Host Europe and Virgin Mobile.