John Malone’s Liberty Global (LGI) has agreed to acquire the Netherland’s largest cableco Ziggo in a stock and cash deal that values the company at about €10bn (US$13.7bn).
The combination of Ziggo and LGI’s local unit UPC Netherlands will…
John Malone’s Liberty Global (LGI) has agreed to acquire the Netherland’s largest cableco Ziggo in a stock and cash deal that values the company at about €10bn (US$13.7bn).
The combination of Ziggo and LGI’s local unit UPC Netherlands will create a company which reaches about 7 million customers – 90% of Dutch households – and has €2.5bn in total revenue, the companies said in a joint statement.
UPC Netherlands is the nation’s second largest cableco.
LGI, which has already built a 28.5% stake in Ziggo, will pay €4.9bn (US$6.7bn) to acquire the remaining shares.
Under the terms of the conditional agreement, Ziggo shareholders will receive €11 in cash, as well as 0.2282 Liberty Global class A ordinary shares and 0.5630 Liberty Global class C ordinary shares for each Ziggo share that they hold. Based on LGI’s class A share price of US$83.27 and class C share price of US$28.80 as of 24 January, the offer values Ziggo ordinary shares at €34.53 each.
The transaction represents a 22% premium on Ziggo’s closing price on 15 October 2013, the day before the Amsterdam-listed cableco announced it had received a preliminary proposal from LGI on a potential takeover offer. Ziggo rejected the offer as inadequate, but confirmed in December that it was back in talks with LGI.
Ziggo’s management and supervisory boards have unanimously approved the offer, which the companies expect to close in the second half of 2014, subject to regulatory approvals.
LGI CEO Mike Fries said the deal will create “a nationwide cable champion that will drive investment and innovation for the benefit of Dutch consumers and businesses alike”.
He said the combined companies will aim for €160m in annual run-late synergies by 2018, helping to boost LGI’s growth in the Netherlands and wider Western Europe.
Ziggo supervisory board chairman Andrew Sukawaty said the deal values Ziggo at 11.3x 2013 EBITDA.
Ziggo has agreed not to seek out other offers but the deal could be terminated if it receives a better one within eight weeks. LGI has the right to match any new offer.
LGI’s financial advisers for the deal are Bank of America Merrill Lynch and Morgan Stanley, and its legal counsel is Allen & Overy. Ziggo’s financial advisers are JP Morgan and Perella Weinberg and its legal counsel is Freshfields Bruckhaus Deringer. Ziggo’s supervisory board is receiving financial advice from ABN AMRO and legal counsel from Stibbe. JP Morgan and Perella Weinberg received legal advice from Nauta Dutilh.
Funding
LGI plans to fund the €4.9bn takeover with cash and shares. The stock component equates to €3.4bn (US$4.6bn) and the cash component to €1.5bn (US$2.2bn).
The cable giant will issue about 32.7 million class A and 80.6 million class C shares to fund the stock consideration. Ziggo shareholders are expected to own about 13% of the adjusted outstanding shares of LGI, with about 9% of the voting rights.
LGI said it has secured fully-committed financing to fund the cash consideration and is planning to raise more than €1.5bn in incremental principle debt at Ziggo, taking its leverage ratio to about 5 times.
The two groups expect to incur about €300m in transaction and financing costs, to be funded through available liquidity and Ziggo’s new debt.
LGI also intends to repay the €460m margin loan it used to help fund purchases of Ziggo shares in 2013 in cash. The company has not yet decided whether it will settle the €618m collar loan also used to fund the purchases in cash, with the offer consideration or a combination of the two. If it were to go solely with the offer consideration, LGI would have to issue up to 5.7 million of new class A and 14.1 million of new class C shares and pay up to €275m in cash.
Ziggo debt financing
Meanwhile, Ziggo has reportedly hired banks for a €3.75bn (US$5.12bn) loan due January 2022 to help fund LGI’s takeover.
The term loan will have euro and US dollar tranches, both with 0.75% Euribor and Libor floors, Reuters reported citing a banker on the deal.
As well as funding the acquisition, proceeds will be used to refinance Ziggo’s existing debt.
Global coordinators for the transaction are reportedly Credit Suisse and Bank of America Merrill Lynch. In addition to these two banks, joint bookrunners and MLAs include ABN AMRO, Credit Agricole, Deutsche Bank, HSBC, ING, JP Morgan, Morgan Stanley, Nomura, Rabobank, Scotiabank and Societe Generale.
Banks are set to meet tomorrow (28 January) in London and New York, with a 4 February commitment deadline, the report stated.
Ziggo posted net debt of €3.074bn as at 31 December 2013. Of this, €405m is owed under a senior credit facility; €750m under a term loan lent on by subsidiary Ziggo Finance; €750m related to 3.625% senior secured notes due 2020; and €1.209bn related to 8% senior unsecured due 2018.
Obermann to step down
Ziggo CEO Rene Obermann, who joined the company from Deutsche Telekom this January, plans to step down if and when the deal closes.
LGI will choose the new CEO and CFO of the combined business, while other management board members will be selected in line with agreed criteria for the integration process.
LGI will also select three new members for the supervisory board, while current independent members Rob Ruijter and one other (to be determined by Ziggo) will stay on initially.
A joint integration committee will be set up, comprised of three senior representatives each from Ziggo and LGI. One of the LGI nominees will act as chair and have the casting vote.
The combined business will have its headquarters in Utrecht, where Ziggo is now based, and operate under the Ziggo brand.
