Liberty Global’s $2.5B Telenet Deal Add to Europe Growth

By Scott Moritz and Joseph de Weck - 2012-09-20T20:28:40Z

Liberty Global Inc. (LBTYA) offered to buy the remaining 49.6 percent of Belgiums Telenet Group Holding NV (TNET) for 1.96 billion euros ($2.5 billion), allowing the John Malone- led cable company more access to Europes pay-TV growth.

Liberty Global, based in Englewood, Colorado, said today that Telenet investors will get 35 euros a share in cash, according to a statement. The offer is 13 percent higher than yesterdays closing price for Mechelen-based Telenets shares. A favorable financial market allowed Liberty to raise money for the transaction over the past month, Chief Executive Officer Michael Fries said at a New York investor conference.

The deal gives Liberty Global a bigger foothold in Europe, where demand for TV, Internet and phone services delivered over cable is increasing. It follows the companys acquisitions of German cable provider Kabel Baden-Wuerttemberg for 3.16 billion euros last year and its larger competitor, Unitymedia, for 3.5 billion euros.

The latest deal will allow Malone, Libertys chairman, to push for stronger collaboration and synergies with his other European operations, said Marc Hesselink, an analyst with ABN Amro Bank NV in Amsterdam. The premium he paid on the Telenet share is also not excessive, which makes it a good deal.

While Europe is Liberty Globals biggest market, the company also has assets in Latin America. Its European customers total 18.4 million. With Telenets 2.15 million cable-TV users, Belgium is Liberty Globals second-biggest market after Germany.

We are a bit of an oddball, Fries said in an interview. Everyones whining about Europe, but weve had really good success. We are in the right markets with the right products at a time when people need connectivity.

Demand for cable services in Europe is increasing, with customers migrating to digital connections from analog. Digital cable penetration among German households is projected to rise to 23.7 percent in 2016 from 11.6 percent in 2011, according to research firm IHS Screen Digest. Total TV, Internet and phone subscriptions with cable companies in the country are forecast to rise by 24 percent to 32 million in 2016.

The offer values Telenet at 5.6 times its earnings before interest, taxes, depreciation and amortization. That compares with a median multiple of 5.3 for 114 telecommunications deals in Western Europe in the past year.

This is a highly accretive deal for our shareholders and their shareholders, Fries said. Now we get access to 100 percent of the cash flow, whereas before we only got half of it.

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Liberty Global’s $2.5B Telenet Deal Add to Europe Growth