Liberty Global to acquire Ziggo for €10bn

DEN HAAG-INTRODUCTIE-KABELBEDRIJF ZIGGOIn a joint statement, Liberty Global and Ziggo have said that an agreement has been reached about the takeover of Holland’s largest cable operator.

The intended stock and cash offer implies a price of €34.53 per ordinary Ziggo share based on January 24, 2014 close (and a price of €35.74 per ordinary Ziggo share based on 10-day VWAP1), valuing Ziggo at approximately €10 billion.

Once completed, the combined footprint of Ziggo and UPC Netherlands will reach 7 million, or over 90% of Dutch homes, and create a (almost) nationwide challenger in the mobile and enterprise businesses to compete with incumbent KPN.

In a first press release the two companies also said that they are “planning to leverage Ziggo’s strong brand nationwide”, which could mean the disappearance of the UPC brand in the country.

The statement also said that the newly created company will centralise all Dutch operations at Ziggo’s Utrecht headquarters, creating “significant synergy opportunities.”

“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% 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,” said Mike Fries, CEO of Liberty Global, in a statement.

“We are targeting €160 million in annual run-rate synergies by 2018, which will underpin our growth profile over the next few years in the Netherlands and for Liberty Global overall, as we continue to build scale in Western Europe. Including the purchase of our initial 28.5% investment in Ziggo last year and the Offer Price for the remaining Ziggo shares, the blended transaction multiple on a synergized basis equates to 9.3x estimated 2014 EBITDA and 14.0x estimated 2014 EBITDA minus capital expenditures.”

“For Ziggo this is a great opportunity to create a Dutch industry leader together with UPC Netherlands. 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,” added Andrew Sukawaty, chairman of the supervisory board of Ziggo.

“The new Ziggo combines two regional networks. By joining forces they will stimulate and maintain the leading position of the Netherlands in the digital economy. For our employees the new combination will allow them to become part of a larger and stronger company, offering new perspectives and career opportunities. This transaction values Ziggo at 11.3x 2013 EBITDA and 18.4x 2013 EBITDA minus capital expenditures which provides our shareholders with a very attractive offer and at the same time by receiving Liberty Global shares allows them to participate in the future of a global industry leader.”

Liberty Global also announced today that its board of directors has approved a stock dividend of one Liberty Global Class C ordinary share on each outstanding Class A, Class B and Class C ordinary share as of the record date for the stock dividend. It is expected that this stock dividend will be issued on March 3, 2014.

Under the terms of the offer and adjusting for completion of the stock dividend, Ziggo shareholders will receive €11.00 in cash, 0.2282 Liberty Global Class A ordinary shares and 0.5630 Liberty Global Class C ordinary shares (0.1674 prior to completion of the stock dividend) for each Ziggo share that they hold (the “Offer Price”). Based on Liberty Global’s Class A share price of $83.27 and Class C share price of $78.80 as of January 24, 2014, the offer implies a price of approximately €34.53 per Ziggo ordinary share.

Based on the 10-day VWAP price, this offer represents a 38% premium to the closing share price of Ziggo of €25.85 on March 18, 2013, the day before the previous private equity shareholders executed an equity sale that preceded Liberty Global’s acquisition of its initial stake in Ziggo and a premium of 22% to the closing share price of Ziggo of €29.24 on October 15, 2013, the day before Ziggo announced it had received a preliminary proposal regarding a potential offer for the company by Liberty Global.