The consolidation in Germany’s cable market continues: Tele Columbus, the third largest market player, has entered into an agreement to acquire the fourth largest cable operator Pepcom from UK-based financial investor Star Capital.
The purchase price amounts to €608 million on a cash and debt free basis (enterprise value). The purchase price payable after taking into consideration net debt, debt-like items and the 30% minority stake in cable company KMS amounts to around €505 million (equity value).
Through the takeover of Pepcom with around 810,000 connected homes, Tele Columbus will reach a total of around 3.7 million households, thereby strengthening its market position as third force after Vodafone subsidiary Kabel Deutschland and Liberty Global subsidiary Unitymedia.
In July 2015, Tele Columbus acquired cable operator Primacom. It has been speculated in the industry that Pepcom could be the next takeover target. In August 2015, Tele Columbus announced a capital increase to finance further purchases.
“The combined customer base of approximately 3.7 million connected homes provides us with new opportunities to develop and market attractive and competitive multimedia services for our partners in the housing industry and the users in our networks,” Ronny Verhelst, CEO of Tele Columbus, said in Berlin. “In the future, we intend to continue pursuing economically and strategically attractive growth opportunities to drive consolidation and strengthen Tele Columbus’ market position even further.”
The closing of the acquisition of Pepcom is subject to approval of the proposed capital increase with intended proceeds of €240 million by the extraordinary shareholders’ meeting on September 14, 2015. The timing of the closing is dependent on the registration of the resolution regarding the capital increase. The closing is expected to occur by the end of 2015, at the latest by April 30, 2016.
Tele Columbus plans to finance the purchase through a combination of cash on balance sheet, additional senior financing and an equity bridge loan. J.P. Morgan acted as exclusive financial advisor to Tele Columbus.
Broadband TV Views: The takeover of Pepcom by Tele Columbus has been widely expected in the industry following the Primacom acquisition as it makes sense to create a strong third force in the market by combining previously fragmented players. The big question, however, concerns the motives behind the strategy: Will Tele Columbus stay an independent player, growing both organically and through smaller scale acquisitions, or has it been a tactical move to make the enlarged company an attractive takeover target for one of the bigger industry players?
