Ziggo rejected an initial offer from Liberty last October as too
low, seven months after the U.S. group controlled by Malone first
bought shares in its Dutch target.
On Monday, Ziggo accepted a cash-and-shares offer at 34.5 euros per
share, a 22 percent premium to Ziggo's share price just before
Liberty's initial bid.
Liberty has been driving consolidation of the European cable market
to profit from rising demand for faster Internet and digital
The company, which gets over 90 percent of its revenue in Europe,
has built its position via acquisitions from Ireland to Romania over
the past decade and already owns 28.5 percent of Ziggo as well as
the whole of Dutch peer UPC.
Combined with UPC, Liberty will reach 7 million people or about 90
percent of Dutch homes, and challenge former state monopoly KPN in
mobile and for business customers.
Ziggo's shares were down 2.6 percent at 32.375 euros at 1633 GMT,
compared with a 1.3 percent decline in the STOXX European telecoms
index. Liberty shares were down 2.7 percent.
Rabobank analyst Frank Claassen said Ziggo's share price may have
reflected over-optimistic investor expectations about the impending
"The cash part is fairly low, and the rest is in Liberty Global
shares, so there's uncertainty about how the Liberty Global shares
are performing," he said, adding that securing regulatory approval
would add several months of uncertainty.
Liberty said it expects to find 120 million euros in cost savings
including job cuts from its UPC/Ziggo combination and a further 40
million euros in core profit from revenue growth by 2018.
One job set to go will be that of Rene Obermann, the former Deutsche
Telekom chief executive who took charge at Ziggo only this month.
END OF EUROPE CONSOLIDATION?
However, Liberty Global, which owns Germany's second-largest cable
operator UnityMedia and bought Britain's Virgin Media for $15.8
billion last year, said in November it did not envisage large-scale
acquisitions beyond Ziggo in Europe.
Bernstein Securities analyst Sam McHugh said Spain's ONO, which
sources say is in talks with Vodafone, Portugal's Zon and France's
Numericable were other potential acquisition targets.
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Liberty, seeking scale and efficiency gains, and Vodafone seeking
fixed-line assets to compete with incumbents were the two main
"We are perhaps approaching the end of an amazing (M&A-led) rally
for European cable. We're also seeing traditional telecom companies
respond, such as with incremental network investments in fibre and
TV," he said.
Ziggo shareholders will receive 11 euros in cash and a mix of
Liberty stock per share.
Liberty, which will also pay a stock dividend, said the cash
component will be 1.6 billion euros and that it would raise Ziggo's
debt by 1.5 billion euros. Ziggo, which had net debt of 3.1 billion
euros at the end of 2013, launched the financing on Monday.
Ziggo said the deal gave it an enterprise value to 2013 core profit
(EBITDA) multiple of 11.3 times. That compares with a median of 9.4
for its peers, according to Reuters data. Liberty paid about 8 times
forward EBITDA for Virgin Media.
Liberty's financial advisers are Bank of America Merrill Lynch and
Morgan Stanley, and its legal counsel is Allen & Overy. Ziggo is
working with J.P. Morgan and Perella Weinberg Partners and law firm
Freshfields Bruckhaus Deringer.
($1 = 0.7307 euros)
(Additional reporting by Sara Webb;
editing by Adrian Croft and Erica Billingham)
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