German cableco Kabel Deutschland (KDG) is evaluating rival Tele Columbus as a possible takeover target, according to reports citing German newspaper Frankfurter Allgemeine Zeitung.
KDG and Tele Columbus declined to comment on market rumours….
German cableco Kabel Deutschland (KDG) is evaluating rival Tele Columbus as a possible takeover target, according to reports citing German newspaper Frankfurter Allgemeine Zeitung.
KDG and Tele Columbus declined to comment on market rumours. However, a KDG spokesperson pointed out that the company has long reiterated its opinion that consolidation in the cable market between so-called level three and four players would be beneficial for both the market and consumers.
According to the report, the German Federal Cartel Office’s approval of US media giant Liberty Global’s takeover of cableco Kabel BW in December 2011 has signalled to many that further consolidation will take place.
Espirito Santo telecoms analyst Andrew Hogley told TelecomFinance that KDG would be the natural strategic buyer for Tele Columbus and could potentially justify paying up to €700m (US$929.5m).
Hogley said that while Tele Columbus is “heavily indebted”, with net debt in the vicinity of €600m to €650m, it could prove attractive to KDG for several reasons.
For instance, of Tele Columbus’ 1.5 million customers, about one million are within KDG’s footprint area.
However, the regulator may not look favourably upon a deal between KDG and such a large direct competitor, with Hogley saying that “regulatory approval would by no means be a foregone conclusion.”
TelecomFinance understands that there are several significant differences between the Liberty/Kabel BW and KDG/Tele Columbus scenarios, meaning that a transaction between the latter two companies may not be allowed.
Unlike Liberty and Kabel BW, KDG and Tele Columbus compete in the same geographical areas.
In addition, the Cartel Office previously told KDG it may not merge with rivals Kabel BW or Unitymedia, having also blocked an acquisition of Pepcom on anti-trust grounds.
Hogley said KDG last looked at Tele Columbus in July 2010 but failed to reach an agreement with its shareholders on price. He also explained that a private equity firm found itself in the same situation late last year.
In August last year, it was reported that private equity firms Star Capital and Providence were both eyeing Tele Columbus, also valued at €700m at the time.
Commenting on KDG’s interest for Tele Columbus, Hogley added its shareholders may be more flexible this time.
