French billionaire Niel bids $3.7 bln to take Iliad private

* Niel now owns 71% of Iliad's shares

* Follows move by fellow tycoon Drahi

* Buyout offer to start on Sept. 8

By Sudip Kar-Gupta and Mathieu Rosemain

PARIS, July 30 (Reuters) - French tycoon Xavier Niel, the founder and controlling shareholder of telecoms firm Iliad ILD.PA , is making a 3.1 billion-euro offer ($3.7 billion) to buy the remaining shares in the company and take it private.

Niel is following the path of another billionaire, Franco-Israeli Patrick Drahi, whose personal holding took private the listed owner of SFR, France's second-biggest telecoms group, earlier this year.

Two main reasons led Niel to seek a delisting of Iliad, the group's chief executive Thomas Reynaud told analysts in a call.

"The first one is the high volatility of the telecoms stock market in general and of Iliad share price in particular," he said.

"(The second one) is the discrepancy between Xavier's views and the stock market's views regarding the value creation potential," he added, citing Iliad's recent decision to step up investments in its 5G networks.

The move compelled Iliad to cut its free cash flow target to finance that move, sending shares sharply lower.

Rumours have circulated since 2018 that Niel could take Iliad private as the company, which shook up France's mobile sector with its low-cost offers, had a very volatile stock performance.

Niel's decision to transfer most of its shares to a single "HoldCo" vehicle at the time also fueled speculation among analysts and investors about a possible take-private offer.

The influential businessman, who currently owns 71% of Iliad, has a myriad of separate personal investments in overseas telecoms firms, media and startups.

Niel also financed Station F, France's startup mega-campus, which President Emmanuel Macron inaugurated in 2017.

His offer of 182 euros per share represents a 61% premium to the closing share price on July 29, valuing 100% of Iliad at roughly 10.7 billion euros.

Iliad, whose rivals in France are Orange ORAN.PA , Bouygues Telecom BOUY.PA and SFR, has recently expanded its activities in Poland and Italy.

Separately, Iliad posted estimated interim financial results showing a 17% rise in underlying earnings, while operating cash flow edged up by 22 million euros.

It said an increase in capital expenditure in France had offset lower losses at its Italian business.

Its Italian division also posted for the first time positive core operating profits over the first six months of the year. ($1 = 0.8410 euros)
Reporting by Sudip Kar-Gupta and Mathieu Rosemain; additional reporting by Gwenaelle Barzeic; editing by Tomasz Janowski and Keith Weir

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