Liberty Global (LGI) has seized the opportunity to acquire a 12.65% stake in Dutch cableco Ziggo from Barclays Capital Securities for €632.5m (US$808m), expanding its presence in the Netherlands.
UK-based Barclays was left with a 14.2% stake in…
Liberty Global (LGI) has seized the opportunity to acquire a 12.65% stake in Dutch cableco Ziggo from Barclays Capital Securities for €632.5m (US$808m), expanding its presence in the Netherlands.
UK-based Barclays was left with a 14.2% stake in Ziggo after it failed to sell most of a 20% stake it underwrote for private equity shareholders Cinven and Warburg Pincus earlier this month.
Liberty paid €25 per share, which compares to a price of €25.05 in the recent accelerated bookbuild.
The Colorado-based cableco said it considers the acquisition “an attractive opportunity to make a strategic investment in a market where it already enjoys a sizeable presence through its UPC Netherlands subsidiary”.
Liberty had long shown interest in Ziggo, and prior to the company’s IPO in March 2012 Liberty was said to consider an outright bid for the Dutch cableco.
Today, LGI described the purchase price as “financially attractive” in light of the stock’s approximate 7.4% dividend yield implied by Ziggo’s expectation it will pay €370m in dividends this year.
Liberty will fund the purchase with a non-recourse margin loan and existing liquidity. The transaction does not require regulatory approvals as Liberty is acquiring only a margin stake.
At the time of writing, Ziggo shares were trading at €26.90 each, valuing the whole company at about €5.4bn.
Analysts have said the raised share price reflects the possibility that Liberty could make a full bid for the company, although this is unlikely to happen in the near future given it is set to buy the UK’s Virgin Media in a stock and cash merger worth about US$23.3bn.
Bernstein Research said in an investor note that “there is long-term logic” in an eventual merger between UPC Netherlands and Ziggo. They estimate the net present value of synergies of such a merger would be about €1 to €1.4bn.
In their view, such a deal would not face the same regulatory issues as German cableco KDG’s proposed acquisition of smaller rival Tele Columbus, which was blocked by the German antitrust regulator. Unlike the German cablecos, UPC Netherlands and Ziggo have complementary footprints with no material overlap, meaning a tie-up would not remove a layer of competition from the market, they said.
“[I]n fact, it would likely create a national operator better equipped to compete with KPN,” they said.
Ziggo noted the acquisition in a short statement, saying its supervisory and management boards “will continue to focus on executing [the company’s] strategy in the best interests of its stakeholders”.
Shares sold as part of the company’s March 2012 IPO priced at €18.50.
Utrecht-based Ziggo serves about 2.8 million households in the Netherlands, with almost 1.8 million internet subscribers, more than 2.2 million digital TV subscribers and 1.5 million telephony subscribers.