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By Freya Berry
LONDON, April 7 Private equity firm Cinven made
a 1.5 billion euro ($2 billion) capital gain on its investment
in French cable operator Numericable, but said on
Monday the era of such hugely profitable deals for its industry
in the cable sector is ending.
Cinven said on Monday that it had realised its biggest ever
gain, giving a return of 4.35 times on the original investment,
as part of a deal in which Numericable will buy Vivendi's
telecoms arm SFR, creating the second-biggest player in
a reshaped French telecoms market.
However, consolidation in the European telecommunications
sector with deals such as the SFR purchase means private equity
funds face a shrinking pool of available companies. This problem
is partly of their own making as they sell off most of their
telecoms assets, leaving the sector dominated by large
"The role of private equity in European cable is probably
coming to an end," said Nicolas Paulmier, Partner at Cinven.
"There may be a role in central Europe for a smaller player, but
the big deals for private equity in cable are now over," he told
Cinven created Numericable nine years ago out of three cable
operators on which it spent 528 million euros. By 2008, when
U.S. private equity fund Carlyle also bought into Numericable,
the company had a 99 percent share of the French cable market.
Under the weekend deal, Cinven and Carlyle have agreed to
exchange their combined holding of 35 percent in the cable firm
for cash and shares in Altice, the holding company of
Numericable's billionaire backer Patrick Drahi.
Cinven's return was higher than the 2.8 times it made in
2013 on its exit of Dutch cable operator Ziggo.
Carlyle declined to comment.
Private equity funds buy stakes in companies and try to make
returns to pay back to investors, often by building up a firm
with mergers and acquisitions (M&A) which they then sell on to
other private equity funds, or companies in the same sector.
Numericable's 13.5 billion euro purchase of SFR is the
latest in a series of deals in the telecoms sector. Last month
Vodafone bought Ono from several private equity firms
including Providence Equity for $10 billion,
Last year also saw several mega-acquisitions, including
Liberty Global's $15.8 billion purchase of Virgin
Media and Vodafone's 7.7 billion euro buy-out of Kabel
As available assets dwindle, the growing size of the
companies involved will make it even harder for private equity
firms to outbid them for assets.
"I think cable will remain attractive for private equity but
they will have a hard time doing again what they did a few years
ago," said a source familiar with the Numericable deal.
Private equity has already lost out in overall M&A deals
this year, and its global share is down by a third as funds
jostle with conglomerates seeking to spend vast cash piles
accumulated since the financial crisis.
"There isn't really anything big left to buy unless someone
wants to target Liberty Global. They've snapped up a lot of
assets, as has Vodafone, and there are few left to buy," said a
($1 = 0.7303 Euros)
(Additional reporting by Anjuli Davies; editing by Clare
Hutchison and David Stamp)