US cableco Liberty Global is reportedly preparing a bid for Dutch rival Ziggo to scupper plans for an IPO this summer.
It has been confirmed that Cinven and Warburg Pincus, Ziggo’s owners, have hired specialist advisory firm STJ to help find banks to…
US cableco Liberty Global is reportedly preparing a bid for Dutch rival Ziggo to scupper plans for an IPO this summer.
It has been confirmed that Cinven and Warburg Pincus, Ziggo’s owners, have hired specialist advisory firm STJ to help find banks to become bookrunners for a flotation.
Reports suggest Deutsche Bank, JP Morgan, Morgan Stanley and UBS have already been selected to manage a listing, which could raise as much as E1.5bn.
Ziggo declined to comment on speculation, and a spokesman insisted no decision had been made on whether it should list.
But Liberty’s bid for Ziggo would be more financially attractive than any IPO, according to reports citing the US group’s chief strategy officer, Shane O’Neill.
Liberty’s plan is similar to when it made a successful last-minute bid in 2009 to acquire Unitymedia, Germany’s number two cableco, which was also looking at floating on the stock market. Liberty also swooped in to pay E3.16bn for Germany’s number three cable operator, Kabel BW, which too had embarked upon a dual track process.
But advisers have told TelecomFinance that this series of foiled IPOs could lead to market fatigue, saying that Ziggo needs to clarify its intentions.
O’Neill is cited saying his group is confident that Dutch regulators would not block the monopoly resulting from its hypothetical takeover of Ziggo. Acknowledging that Liberty already owns number two cableco UPC Holland, he pointed to similar monopolies in France, Spain and the UK, which have all been allowed to exist.
Although the Kabel BW acquisition, which arguably raises its own competition concerns, is still pending regulatory approval, banking sources have told TelecomFinance that the private equity owners of Ziggo – and Swedish cableco ComHem – have been waiting for Kabel’s own sale to be resolved before pressing ahead with their exit strategies.
And, as previously reported by TelecomFinance, Liberty’s O’Neill told February’s Cable Congress in Switzerland that, although Liberty would acquire Kabel at the right price, Ziggo “would be a better fit”. Announcing Q4 results on 24 February, Liberty CEO and president Mike Fries said his company’s balance sheet was in “great shape” from a liquidity and duration perspective.
“At December 31, we had total liquidity of over US$5bn, with cash and equivalents of US$3.8bn, including US$2.6bn of corporate cash,” said Fries.
“Following several recent financings at attractive interest rates, the average duration of our long-term debt is now approximately seven years, with only 5% of our debt coming due over the next three years.
“We remain committed to our strategy of returning capital to shareholders through stock buybacks, and are announcing a US$1bn target for repurchases of equity securities in 2011 after spending a similar amount in 2010. Combined with the strong operating momentum in our core cable business and our active M&A pipeline, we are excited about the year ahead.” However, for the three months to the end of December 2010, Liberty posted profits down 43% to US$57.5m, compared with US$100m for the corresponding period in 2009, which the company blamed on a weaker tax benefit.
Q4 revenue increased 18% to US$2.43bn, or 5% excluding currency fluctuations.
Reports suggest private equity firms CVC and Hellman & Friedman could also place bids for Ziggo.
Meanwhile, Ziggo has recently confirmed that CEO Bernard Dijkhuizen is set to remain at the helm for a further three years, contrary to reports that the company’s owners were looking at bringing in a foreign CEO to shore up investor confidence.
Liberty declined to comment.
