UK satellite broadcaster BSkyB has agreed to sell its B2B telecoms business Easynet Global Services to UK private equity group LDC for £100m. LDC is meanwhile already planning to use its new asset as a growth vehicle.
The deal is subject to regulatory…
UK satellite broadcaster BSkyB has agreed to sell its B2B telecoms business Easynet Global Services to UK private equity group LDC for £100m. LDC is meanwhile already planning to use its new asset as a growth vehicle.
The deal is subject to regulatory approval and a works council consultation.
BoA Merrill Lynch advised Sky, while former Merrill Lynch telecoms banker Tom Wells at Arma Partners advised LDC.
The deal comprised a £68m equity cheque, with the remainder paid in “fairly typical junior and senior” debt provided by HSBC and Aries Capital.
LDC, which is fully funded by the Lloyds Banking Group, is backing current Easynet CEO David Rowe and his management team.
Speaking to SatelliteFinance, Daniel Sasaki, the director at LDC who sourced and executed the Easynet deal, described the transaction as an institutional buyout rather than an MBO, since the management had not been invested in the group. Post-deal, however, David Rowe and other key executives will be buying shares in the company, he said.
Sasaki said LDC expected to support management in making acquisitions. We will be taking an opportunistic approach, focusing on expanding our footprint in North America and adding existing businesses in Western Europe that have complementary activities.
Future acquisitions, said Sasaki, would be financed with a debt/equity combination rather than loans or Easynet’s balance sheet
“We have a good track record of buying companies, some of which end up costing more than the value of the original acquisition”. An example of this took place in 2008, when LDC portfolio company Pro-Bel, a broadcasting technology company acquired for £11m in an MBO, merged with Snell & Wilcox, which Advent had paid £22m to acquire in a separate MBO.
As part of the proposed deal, Sky will retain the UK network assets that it acquired as part of the original acquisition of Easynet Group in 2005. Furthermore, Sky and LDC have agreed a long-term supply contract whereby Easynet will have continued access to Sky’s fibre network, with Easynet remaining a key supplier to Sky.
The buyer has named former BT Global Services CEO Hanif Lalani as a non-executive director.
Sasaki called Hanif Lalani “a valuable addition to the team”. “He has a tremendous set of relevant relationships and very sound financial experience.”
Sky CFO Andrew Griffith said that while Easynet had been “central to the early success” of Sky Broadband and Sky Talk, the company preferred to exit the B2B segment.
Peter Brooks, MD at buyer LDC said that from his perspective, Easynet “provides innovative services to multinational clients across the attractive data networking and managed hosting sectors”.
Sasaki, for his part, said he expected Easynet’s focus on IP solutions, broadband and network management would give it a “keystone” position to capture the value of cloud computing and software-as-a-service.
He added that Easynet boasted consistent double-digit EBITDA growth, as well as large, measurable contracts such as that of TFL, which will see the company manage connectivity for cameras that monitor buses.
LDC noted that European companies are expected to increase expenditure on business data services, thanks to the increasing trend towards outsourcing server and hosting management and location. It said that its own specialty areas include TMT, business and support services and BPO.
The private equity group says it focuses on UK companies seeking £2-100m of equity for MBOs, institutional buy-outs and development capital transactions.
Sat broadcaster reveals strong annual results
BSkyB announced a 10% rise in adjusted operating profits to £855m for the year ending June 30, 2010. The increase was predominantly driven by a significant increase in the number of HD customers with 429,000 net additions in the fourth quarter alone. The satellite broadcaster had a total of 9.860m customers at the end of the fiscal year.
For the year, BSkyB reported an 11% increase in both adjusted revenue, to £5.91bn, and adjusted EBITDA, to £1.19bn. Bottom-line pre-tax profits rose to £1.17 billion due to the disposal of shares in UK broadcaster ITV, after a write-down on the holding a year ago.
Jeremy Darroch, chief executive of BSkyB, said: “High definition goes from strength to strength, with more than twice as many customers as a year ago. At the same time, customers are choosing broader bundles of services, with one in five now taking all three of TV, broadband and telephony. Overall, customers are taking 45% more additional subscription products than a year ago.”
The company recently rebuffed a 700p-a-share approach from Rupert Murdoch’s News Corporation for the 61% of BSkyB that media giant does not currently own, a move valuing the FTSE 100 Index company at around £12bn. BSkyB called for an offer in excess of 800p a share, although it agreed to begin work on the regulatory process required for a tie-up.
