Liberty Global to finally acquire Ziggo

March 2014 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

After a nearly 10 month battle, Liberty Global finally announced in January that it has agreed to acquire Dutch cable television operator Ziggo in a deal worth an estimated $13.7bn including debt.

The deal came after Ziggo rejected an offer from Liberty in October 2013, which was deemed too low by the Dutch group. Seven months prior to the rejected offer, Liberty first acquired a minor stake in Ziggo. However, on 27 January the Utrecht, Netherlands broadcaster finally accepted a cash and shares offer from Liberty.

Under the terms of the deal, Ziggo shareholders will receive €11 in cash per Ziggo share, plus Liberty Global shares in exchange. In total, based on the closing price of Liberty’s shares on Friday 24 January, the offer values Ziggo at €34.53 a share. The agreed share price represents a 22 percent premium on Ziggo’s share price immediately prior to Liberty’s initial, unsuccessful bid.

The deal has been unanimously recommended to Ziggo’s shareholders by the company’s supervisory and management boards. Both companies expect the deal to close in the second half of 2014, although the transaction is subject to standard regulatory approval. According to Liberty the cash element of the deal will be €1.6bn and the transaction will be predominantly funded by debt. The deal, once completed, will raise Ziggo’s debt by €1.5bn.

Over the last 12 months Liberty has been strengthening its position in Europe, driving consolidation across the continent. The company already controls Germany’s second-largest cable operator UnityMedia and in 2013 acquired British telephone, television and broadband internet provider Virgin Media in a deal worth $15.8bn. The deal for Ziggo will see Liberty Global combine its existing Dutch operations, UPC Netherlands, with its new acquisition creating a combined organisation with annual revenue of €2.5bn. UPC Netherlands is the second-largest cable provider in the Netherlands, providing cable television, broadband and telephone service to approximately 2.8 million households. Liberty Global currently receives more than 90 percent of its revenue from its various European operations, a position it has built via acquisitions. In addition to the stakes purchased in Virgin Media and Ziggo, over the last 10 years Liberty has acquired interests in broadcasters and service providers across Europe, including in Ireland, Belgium and Romania, among others.

In a statement announcing the deal Mike Fries, chief executive of Liberty Global, said “This transaction creates a nationwide cable champion that will drive investment and innovation for the benefit of Dutch consumers and businesses alike. Our combined operations will reach over 90 percent of all Dutch households allowing us to compete more effectively with the other national telecommunications and satellite platforms in the Netherlands, and at the same time generate significant revenue and operating efficiencies.”

Liberty is targeting €160m of annual run-rate synergies from the deal by 2018. The company hopes that these synergies will help to solidify the position of both the Ziggo brand and the wider Liberty Global company across the Netherlands and the rest of Western Europe.

Including Liberty’s acquisition of an initial 28.5 percent stake in Ziggo in 2013 and the agreed offer price for the rest of the outstanding Ziggo shares, the blended transaction multiple on a synergised basis equates to 9.3 times the company’s estimated 2014 earnings before interest, taxes, depreciation and amortisation (EBITDA) and 14 time the group’s estimated 2014 EBITDA minus capital expenditures. “For Ziggo this is a great opportunity to create a Dutch industry leader together with UPC Netherlands,” said Andrew J. Sukawaty, chairman of Ziggo’s supervisory board. “In essence, this transaction is about two Dutch companies coming together. Our customers will benefit as the new combination has an agenda of investing in growth and innovative solutions, helping customers to enjoy media and entertainment even more while at the same time ensuring a high level of data-security and privacy.”

Richard Summerfield