US cableco Liberty Global is reportedly preparing a bid for Dutch rival Ziggo, which would scupper plans for an IPO that could take place this summer.
The bid for Ziggo will be more attractive financially than the reported E7bn its private equity owners…
US cableco Liberty Global is reportedly preparing a bid for Dutch rival Ziggo, which would scupper plans for an IPO that could take place this summer.
The bid for Ziggo will be more attractive financially than the reported E7bn its private equity owners are seeking to raise through a flotation, reported the Financial Times citing Liberty’s chief strategy officer, Shane O’Neill.
Cinven and Warburg Pincus, Ziggo’s owners, have held talks with specialist advisory firm STJ to advise on its potential IPO, the report adds.
The plan is similar to when Liberty made a successful bid in 2009 to acquire Unitymedia, Germany’s number two cableco, which was also looking at floating on the stock market at the time. It has also just agreed to pay E3.16bn for Germany’s number three cable operator, Kabel BW, which had embarked upon a dual track process.
O’Neill is cited saying his group is confident that Dutch regulators would not block the monopoly that would result from its takeover of Ziggo. Although Liberty already owns the country’s second largest 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 changing its management.
Its owners were previously reported to be considering bringing in a foreign CEO to shore up investor confidence in the company’s near future.
A spokesman for Ziggo declined to comment on speculation about its talks with third parties, but insisted: No decision has been made on an IPO”.
Liberty could not be reached before the press deadline.