* Vodafone seeking to head off Ono's planned IPO
* Deal seen topping 7 billion euros
* Analysts caution about high price
By Kate Holton and Robert Hetz
LONDON/MADRID, Feb 10 Britain's Vodafone
has offered to buy Spain's largest cable operator Ono from its
private-equity owners, two people familiar with the situation
said, in a deal that could top 7 billion euros ($9.5 billion).
Telecom operator Vodafone is seeking to persuade Ono, which
sells fixed and mobile phone, TV and internet services, to drop
its plans for a stock market listing intended to capitalise on
high investor interest in European cable firms.
This interest reflects how consumers are increasingly
turning to cable companies for television and high-speed
broadband at faster speeds and often lower prices than from
Cable also offers the prospect of better returns for
telecoms operators after years of slashing prices on mobile
phone deals and other services to retain cash-strapped European
Vodafone's offer, ahead of the Spanish company's board
meeting on Tuesday, was its second after the first was rejected
as "unacceptably low", according to a third person familiar with
While Ono's owners have been considering an initial public
offering (IPO), they may now opt for a straight sale as U.S.
cable firm Liberty Global has also expressed an
interest in recent weeks.
While people familiar with the matter have told Reuters that
Ono believes it has an enterprise value of at least 7 billion
euros ($9.5 billion), other sources have said that any buyer
could have to pay up to 9 billion euros.
The cable sector trades on an enterprise value to 2013 core
profit (EBITDA) multiple of 9.4 times, according to Reuters
data. Ono had core earnings of 752 million euros for 2012, which
at the sector multiple of 9.4 times would give an enterprise
value of 7.1 billion euros.
A source familiar with the situation earlier told Reuters
that any buyer would have to pay 10 to 12 times operating profit
if it hoped to preempt the IPO.
"It's clear now that Vodafone is interested so if it can get
to an offering price that the investors will accept - one which
reflects the value of the IPO and the long-term potential of the
business - then it will likely get its hands on the company,"
the third source said.
The two groups declined to comment on Monday while private
equity funds Providence Equity Partners, Thomas H. Lee Partners,
CCMP Capital Advisors, and Quadrangle Capital, who own 54
percent of Ono, either declined to comment or could not be
The second bid by Vodafone, which is investing in its
networks after selling its U.S. arm for $130 billion, fits with
its new strategy of acquiring broadband assets to allow it to
offer bundled services to consumers and offload traffic from its
The world's second-largest operator by subscribers is also
likely to be wary of what happened in Germany after it walked
away from a bid for KDG in 2010 - only to return once it had
floated on the stock market with a much higher price.
Its desire for fixed-line assets has put it up against
billionaire John Malone's Liberty Global which has also been on
a spending spree to increase the size of its empire in Europe,
where it derives more than 90 percent of its revenue.
The two firms fought to buy Germany's Kabel Deutschland
last year, with Liberty forcing Vodafone to raise its
offer to 7.7 billion euros. Liberty also bought Britain's Virgin
Media for $15.8 billion last year, and has just agreed to pay 10
billion euros for Dutch cable operator Ziggo.
Many analysts question whether Liberty could fund another
deal so soon after Ziggo. Analysts and sector bankers also say
the deal makes more sense for Vodafone.
In Spain, where a long recession has reduced the sums
consumers are willing to pay for telephony, Vodafone has been
working with Orange to build a fibre network in major
cities, mainly Madrid and Barcelona, to offer a wider range of
A deal for Ono could work well as the Spanish company is
more focussed in smaller cities and rural areas and analysts say
it would be a stronger fit than with Liberty.
However with Vodafone's entire Spanish business valued by
bankers at between 3.5 billion and 5 billion euros, spending 7
billion euros in what many see as a defensive move against
market leader Telefonica is causing some analysts
Macquarie analyst Guy Peddy said Vodafone's interest showed
how the group needed better infrastructure to compete with
Telefonica but he noted that deal multiples for cable companies
were invariably higher than for telecom firms.
"Ono is really not growing, so it is a substantive multiple
for that, and it would be tantamount to a quite material
increase in their investment in Spain," he said. "We can
understand why they are doing it but we are always fearful of