Bloomberg News

Malone’s Liberty Vies With Vodafone for Cable Assets

January 28, 2014

Europe's Cable Assets

Cable takeovers fit the expansion strategy of London-based Liberty Global, which has spent almost $50 billion on European assets over the past decade. Photographer: Andrey Rudakov/Bloomberg

Liberty Global Plc (LBTYA:US), the European cable company controlled by billionaire John Malone, may compete with Vodafone Group Plc (VOD) for the continent’s few remaining cable assets as they seek to build pay-TV empires.

Liberty Global’s agreement to fully take over Dutch broadband provider Ziggo NV (ZIGGO) for $6.7 billion comes as Vodafone seeks to acquire Spain’s Grupo Corporativo ONO SA, which is preparing for an initial public offering, people familiar with the talks have said. Malone told Bloomberg News in an interview last year he would look at southern Europe for opportunities, and Liberty Global Chief Executive Officer Mike Fries in September cited ONO as a potential target.

Cable takeovers fit the expansion strategy of London-based Liberty Global, which has spent almost $50 billion on European assets over the past decade. Vodafone made its biggest move into cable in October by beating Liberty Global for Germany’s Kabel Deutschland Holding AG, paying more than $10 billion.

“Vodafone has a cash stockpile, and Liberty has a stated acquisitions strategy,” said Steven Hartley, a telecommunications analyst at Ovum in London. “As cable opportunities arise in Europe they will be the usual suspects.”

Until Liberty Global began its acquisitions spree, cable was mostly a “cottage industry,” Hartley said. “Now you’ve got people coming in from the traditional TV side and people coming in from telecoms side with broadband who want to offer all these services under one roof.”

Market Growth

Europe’s cable and satellite operators are expected to grow about 15 percent on average this year, driven by acquisitions, according to data compiled by Bloomberg Industries. Sales growth excluding deals is forecast to be about 4.8 percent, slower than the 6 percent to 7 percent growth over the last three years.

Vodafone’s interest in ONO is seen as a strategic move, since the company already owns a mobile-phone network there, while Liberty Global’s interest would be more financial and such a buyout would depend on whether ONO would boost earnings, said Claire Enders, owner of Enders Analysis in London.

Liberty Global would also be less likely to overbid, she said, given the fact it also acquired the U.K.’s Virgin Media Inc. for $16 billion in the past year. “If Vodafone wants to buy ONO at any price they can and easily trump Liberty Global because Liberty is sensitive on price.” Liberty shares increased 0.7 percent to $81.96 as at 12:26 p.m. in New York.

Sweden, France

Vodafone is seeking to expand into high-speed Internet and television, while Liberty Global has spent years buying cable companies in eastern Europe, Germany and Scandinavia. Vodafone spokesman Matt Morgan declined to comment on whether it would bid for ONO or other European cable assets. The company’s shares declined 0.1 percent to 223.30 pounds in London trading.

ONO, valued at about 6.4 billion euros, has been exploring an IPO and is close to hiring banks for the offer, people familiar with the matter said on Jan. 20.

France’s Numericable SAS (NUM) sold shares for the first time in November. Swedish cable operator Com Hem AB has held preliminary talks with private-equity owner BC Partners Ltd. about an IPO, people with knowledge of the matter said this month.

Liberty Global’s agreement to buy Utrecht-based Ziggo came after the Dutch company rejected an initial takeover, calling it “inadequate.” In mid-December Ziggo said those talks had been revived.

Ziggo investors will receive 34.53 euros for each share -- including 11 euros in cash and the remainder in Liberty Global stock, the companies said yesterday. The Dutch company is seeking 3.7 billion euros of loans to finance its buyout, said a person with knowledge of the matter, who asked not to be named because the discussions are confidential.

Obermann Future

Ziggo slipped 0.3 percent to 32.39 euros in Amsterdam, adding to yesterday’s 2.9 percent decline after the takeover agreement. The stock has gained 74 percent since its 2012 IPO.

Former Deutsche Telekom AG CEO Rene Obermann, who took over as Ziggo’s chief this month, will leave the company after the purchase is complete. He stands to get a payoff of at least 4.7 million euros, Rheinische Post reported, citing unidentified people close to Ziggo. Liberty Global spokesman Marcus Smith didn’t immediately have a comment.

Diederik Karsten, executive vice president at Liberty, said the new board will be “largely filled in” before the transaction closes. He declined to say who will become new CEO.

Liberty Global predicts synergies from the combination to reach an annual rate of 160 million euros by 2018.

“The synergies are evident and there are also good prospects for sharing gateways and other technologies, particularly as the cloud comes to the fore,” said Matt Harrigan, a Denver-based analyst at Wunderlich Securities Inc.

Belgian Takeover?

With Ziggo out of the way, Malone may also turn his attention to buying up the rest of Ziggo’s neighbor, Belgian cable operator Telenet Group Holding NV (TNET), in which Liberty Global already owns 58 percent. Telenet investors rejected a 2 billion-euro bid from Liberty Global for the rest last March.

“I don’t see why they wouldn’t go for Telenet; it’s a similar kind of dynamic for them as Ziggo,” said Ted Hall, a senior analyst at researcher Informa Telecoms & Media in London.

Liberty Global, based in London, is also studying a spinoff of its Latin American businesses, a move that would make it a purely European cable company.

Separately, Liberty Global agreed to buy back shares worth $1 billion, which will be added to a two-year $3.5 billion stock repurchase program that’s under way. Liberty Global has repurchased more than $10 billion of its equity since 2005, it said in a statement.

Back at home, Malone re-entered the U.S. cable market in May when his Liberty Media Corp. (LMCA:US) paid $2.6 billion for 27 percent of Charter Communications Inc., the fourth-largest U.S. cable operator. Earlier this month, Charter announced an offer for Time Warner Cable (TWC:US) Inc. valuing the cable provider at more than $61 billion including debt. Time Warner Cable rejected the bid as too low.

To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

Cable takeovers fit the expansion strategy of London-based Liberty Global, which has spent almost $50 billion on European assets over the past decade. Photographer: Andrey Rudakov/Bloomberg ONO, valued at about 6.4 billion euros, has been exploring an IPO and is close to hiring banks for the offer, people familiar with the matter said on Jan. 20. Photographer: Angel Navarrete/Bloomberg

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Companies Mentioned

  • LBTYA
    (Liberty Global PLC)
    • $44.36 USD
    • 0.86
    • 1.94%
  • LMCA
    (Liberty Media Corp)
    • $48.82 USD
    • -0.16
    • -0.33%
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