By Sangameswaran S and Tanishaa Nadkar
(Reuters) - Macquarie unit MEIF 6 Fibre Ltd is to buy KCOM Group Plc (L:KCOM) in a deal that values the British telecoms company at 627 million pounds, ending a bidding war with a UK pension fund.
The high value of the deal reflects the appeal of KCOM's prized full-fibre network, an attractive asset to firms looking to build a presence in the sector without spending on new infrastructure roll-out.
Macquarie funds have been investors in critical telecom infrastructure since the early 2000s, including investments in European players Arqiva, Poland-based INEA and Denmark's TDC.
Founded in 1899 as the telephone department in Hull Municipal Corporation, KCOM now offers managed network and cloud-based services across the United Kingdom.
It provides telecom services in Hull, a port city in East Yorkshire, the only British region where larger rival BT (L:BT) does not have a presence.
Britain's takeover regulator said last week it would auction KCOM after the Humber Bidco unit of British pension fund Universities Superannuation Scheme Ltd (USSL) and MEIF 6 Fibre failed to make a final offer for the company.
The Takeover Panel, which regulates merger and acquisition activity, rarely auctions companies, though it intervened in last year's battle between Comcast (NASDAQ:CMCSA) and Twenty-First Century Fox (N:DIS) to buy broadcaster Sky.
MEIF offered 120.3 pence per KCOM share in the final day of the five-day auction, while USSL bid 113 pence, the companies said in separate statements later confirmed by the regulator.
KCOM said it found MEIF's offer to be fair and reasonable, and recommended shareholders to vote in favour of it.
USSL unit Humber Bidco's final offer valued KCOM at 589 million pounds.
The company had already withdrawn a recommendation for USSL's offer before the takeover regulator intervened and announced that the competitive nature of the bids meant there would be an auction process.
KCOM issued a profit warning last year after a slew of management changes, including the departure of its chief executive and finance chief.
Former BT Plc (L:BT) executive Graham Sutherland was appointed CEO in October and announced a review of KCOM's business strategy a month later.
MEIF had intended to offer 108 pence per share for KCOM in June, 11 pence above the offer submitted by Humber Bidco, and had initially valued the company at 563 million pounds.