Liberty Global, the biggest international cable TV conglomerate, has bought into Germany, buying the second largest cable group Unity Media for €3.5 billion ($5.23 billion at the current crazy conversion rate), which includes around €1.5 billion in debt, which appears to have been immediately cancelled.
The terms of the agreement imply a total equity value for Unity Media of €2.0 billion and an enterprise value of €3.5 billion. Closing is expected to take place in the first half of 2010, subject to the requisite regulatory approvals.
Liberty Global has strong cable holdings in Europe including the Netherlands, Switzerland, Austria, Ireland, and Belgium, and central Europe in Hungary, Romania, and Slovakia, as well operations as far afield as in Chile and Japan, totalling 16.6 million cable customers, many of them triple play customers. The deal will add around 4.6 million German subscribers, taking the installed base to 21 million homes, almost the size of Comcast in the US.
The last five years have seen a major comeback for cable outside of the US and this particular conglomerate plus one or two others like Numericable, Virgin and Kabel Deutschland, hold back IPTV and satellite from sweeping across Europe.
Many of these organizations were either bankrupt, discredited or both and went through debt to equity swaps, and private equity groups and Liberty have toiled to update the infrastructure and make it competitive once again. With this move Liberty could potentially start to roll up European cable into a single strong player that can terrorize the local telcos. All it needs now is a single Europe wide MVNO or cellular brand to go with its triple plays, to create an irresistible quad play.
‘This transaction reinforce Unity Media’s successful strategy to exploit the significant growth potential in Germany’s under-penetrated broadband and pay TV markets. As part of the world’s largest international cable company, Unity Media and its customers will benefit significantly from increased access to new technologies, research and development from across the globe. With backing LGI’s Unity Media will become an even stronger competitive force in the newly emerging triple play market and will continue to play a leading role in transforming Germany’s cable industry long into the future. ‘
The company immediately terminated a request for consent to raise €1.275 billion, and another for debt facilities for €100 million and Unity’s €130 million revolving credit facility. Expect cable to become exceptionally competitive in Europe up against any other form of pay TV.