Liberty Global, the US-owner of UPC Broadband, is to purchase the German cablenet Unity Media for €3.5 billion. Private equity owners Finakabel Holdings/BC Partners and Apollo Management were expected to launch an IPO yesterday (November 12), when the operator announced its third quarter results, being named as the most likely date for an announcement.
Unity Media is the second largest cable network in Germany after Kabel Deutschland. It operates the regional networks that were formerly owned by Deutsche Telekom in the states of Hesse and Northrhine-Westphalia, serving 10 of the 20 largest cities in Germany, including Cologne, Dusseldorf, and Frankfurt.
“We are excited about this transaction as it complements our existing European footprint and has significant untapped growth potential in one of the fastest growing cable markets in Europe,” said Mike Fries, President and CEO of Liberty Global. “The addition of Unitymedia not only enhances our European presence, but adds significant scale to our global operations, as our footprint, including Unitymedia, will exceed 40 million homes.”
The binding agreement places an equity value of €2 billion on Unity Media GmbH and an enterprise value of €3.5 billion. The transaction is scheduled to complete in the first half of 2010 and is subject to regulatory approval.
“This transaction marks an exciting new phase in Unitymedia’s development and brings significant benefits to our customers, employees and other stakeholders,” said Parm Sandhu, CEO, Unity Media GmbH. “It reinforces Unitymedia’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, Unitymedia and its customers will benefit significantly from increased access to new technologies, research and development from across the globe. With LGI’s backing Unitymedia 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.”
Unitymedia yesterday demonstrated its credentials as a leading triple play provider, increasing its third quarter RGUs for so-called “new services” by 39% year on year. Cable revenue, excluding Bundesliga was up 3% to €227 million year-on-year, blended ARPU up 8% to €14.15 with 1.41 RGUs per customer and adjusted Cable EBITDA up 12% to €113 million. As of September 30, 2009 Unitymedia held 3,247,000 analogue basic cable subscribers and 1,301,000 to its digital basic service.
It is too early to know as to how Liberty Global might integrate Unitymedia into its European operations, while much of the UPC network is centralised from Amsterdam, Belgium’s Telenet and Switzerland’s Cablecom have been allowed to function independently. There may also be calls to create a united technology infrastructure between Unitymedia and its neighbour Kabel Deutschland.
UBS Investment Bank acted as lead financial advisor to Unitymedia in the transaction. Unitymedia was also assisted by Morgan Stanley, Nomura, HVB and Latham & Watkins.
In the past, UPC was active on the German market holding shares in the cable operators PrimaCom and TSS/EWT. Also, an attempt in 2002 to acquire all networks formerly owned by Deutsche Telekom (Unitymedia, KabelBW and Kabel Deutschalnd KDG) were torpedoed by the German monopolies and competition authority Bundeskartellamt.
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