Thursday 22 March 2018

US cable giant snaps up Dutch competitor Ziggo

Liberty's John Malone and (inset) Humewood Castle, the 19th-century Gothic mansion on 450 acres in County Wicklow
Liberty's John Malone and (inset) Humewood Castle, the 19th-century Gothic mansion on 450 acres in County Wicklow

Anthony Deutsch and Philip Blenkinsop

US CABLE group Liberty Global has won its 10-month pursuit of Ziggo with a deal that values the Dutch operator and its debt at €10bn and expands billionaire John Malone's vast European cable empire.

Ziggo rejected an initial offer from Liberty last October as too low, seven months after the US group controlled by Mr Malone first bought shares in its Dutch target.

Yesterday, Ziggo accepted a cash-and-shares offer at €34.5 per share, a 22pc premium to Ziggo's share price just before Liberty's initial bid.

Liberty has been driving consolidation of the European cable market to profit from rising demand for faster internet and digital television. It has built its position via acquisitions in Ireland, where it owns UPC, and elsewhere in Europe over the past decade. It already owns 28.5pc of Ziggo, as well as the whole of Dutch peer UPC.

Combined with UPC, Liberty will reach seven million people, or about 90pc of Dutch homes, and challenge former state monopoly KPN in mobile and for business customers.

Rabobank analyst Frank Claassen said Ziggo's share price may have reflected over-optimistic investor expectations about the impending offer.

Liberty said it expected to find €120m in cost savings, including job cuts from its UPC/Ziggo combination, and a further €40m in core profit from revenue growth by 2018.

One job set to go will be that of Rene Obermann, the former Deutsche Telekom chief executive who took charge at Ziggo only this month.

Across the Atlantic, Charter Communications, backed by Malone's Liberty Media Corp, is bidding $37bn (€27bn) for larger rival Time Warner Cable.

However, Liberty Global, which owns Germany's second-largest cable operator UnityMedia and bought Britain's Virgin Media for $15.8bn last year, said in November it did not envisage large-scale acquisitions beyond Ziggo in Europe.

Bernstein Securities analyst Sam McHugh said Spain's ONO, which sources say is in talks with Vodafone, Portugal's Zon and France's Numericable were other potential acquisition targets.


Liberty, seeking scale and efficiency gains, and Vodafone, seeking fixed-line assets to compete with incumbents, were the two main likely buyers.

"We are perhaps approaching the end of an amazing (M&A-led) rally for European cable," Mr McHugh said.

Liberty, which will also pay a stock dividend, said the cash component will be €1.6bn and that it would raise Ziggo's debt by €1.5bn. Ziggo, which had net debt of €3.1bn at the end of 2013, launched the financing yesterday.

Ziggo said the deal gave it an enterprise value to 2013 core profit (EBITDA) multiple of 11.3 times. That compares with a median of 9.4 for its peers. Liberty paid about 8 times forward EBITDA for Virgin Media.

Irish Independent

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