* Offer values whole of Ziggo plus debt at 10 bln euros
* Cash/share offer equivalent of 34.53 euros per share
* Liberty already owns 28.5 pct of Dutch group
* Ziggo shares underperform European telecom peers
By Anthony Deutsch and Philip Blenkinsop
UTRECHT, Netherlands/BRUSSELS, Jan 27 U.S. cable
group Liberty Global has won its 10-month pursuit of
Ziggo with a deal that values the Dutch operator and
its debt at 10 billion euros ($13.7 billion) and expands
billionaire John Malone's vast European cable empire.
Ziggo rejected an initial offer from Liberty last October as
too low, seven months after the U.S. group controlled by Malone
first bought shares in its Dutch target.
On Monday, Ziggo accepted a cash-and-shares offer at 34.5
euros per share, a 22 percent premium to Ziggo's share price
just before Liberty's initial bid.
Liberty has been driving consolidation of the European cable
market to profit from rising demand for faster Internet and
The company, which gets over 90 percent of its revenue in
Europe, has built its position via acquisitions from Ireland to
Romania over the past decade and already owns 28.5 percent of
Ziggo as well as the whole of Dutch peer UPC.
Combined with UPC, Liberty will reach 7 million people or
about 90 percent of Dutch homes, and challenge former state
monopoly KPN in mobile and for business customers.
Ziggo's shares were down 2.6 percent at 32.375 euros at 1633
GMT, compared with a 1.3 percent decline in the STOXX European
telecoms index. Liberty shares were down 2.7 percent.
Rabobank analyst Frank Claassen said Ziggo's share price may
have reflected over-optimistic investor expectations about the
"The cash part is fairly low, and the rest is in Liberty
Global shares, so there's uncertainty about how the Liberty
Global shares are performing," he said, adding that securing
regulatory approval would add several months of uncertainty.
Liberty said it expects to find 120 million euros in cost
savings including job cuts from its UPC/Ziggo combination and a
further 40 million euros in core profit from revenue growth by
One job set to go will be that of Rene Obermann, the former
Deutsche Telekom chief executive who took charge at Ziggo only
END OF EUROPE CONSOLIDATION?
Across the Atlantic, Charter Communications, backed
by Malone's Liberty Media Corp, is bidding $37 billion
for larger rival Time Warner Cable.
However, Liberty Global, which owns Germany's second-largest
cable operator UnityMedia and bought Britain's Virgin Media for
$15.8 billion last year, said in November it did not envisage
large-scale acquisitions beyond Ziggo in Europe.
Bernstein Securities analyst Sam McHugh said Spain's ONO,
which sources say is in talks with Vodafone, Portugal's
Zon and France's Numericable were other
potential acquisition targets.
Liberty, seeking scale and efficiency gains, and Vodafone
seeking fixed-line assets to compete with incumbents were the
two main likely buyers.
"We are perhaps approaching the end of an amazing (M&A-led)
rally for European cable. We're also seeing traditional telecom
companies respond, such as with incremental network investments
in fibre and TV," he said.
Ziggo shareholders will receive 11 euros in cash and a mix
of Liberty stock per share.
Liberty, which will also pay a stock dividend, said the cash
component will be 1.6 billion euros and that it would raise
Ziggo's debt by 1.5 billion euros. Ziggo, which had net debt of
3.1 billion euros at the end of 2013, launched the financing on
Ziggo said the deal gave it an enterprise value to 2013 core
profit (EBITDA) multiple of 11.3 times. That compares with a
median of 9.4 for its peers, according to Reuters data. Liberty
paid about 8 times forward EBITDA for Virgin Media.
Liberty's financial advisers are Bank of America Merrill
Lynch and Morgan Stanley, and its legal counsel is Allen &
Overy. Ziggo is working with J.P. Morgan and Perella Weinberg
Partners and law firm Freshfields Bruckhaus Deringer.