July 27, 2015 / 10:36 AM / 4 years ago

UPDATE 1-Zegona buys Spain's Telecable for $706 mln in first deal

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LONDON, July 27 (Reuters) - An investment vehicle set up by two former Virgin Media executives bought Spanish cable operator Telecable for $706 million including debt on Monday, putting it at the centre of Spain’s telecom sector its first deal.

The operator from northwest Spain was bought by Zegona , formed by Eamonn O’Hare and Robert Samuelson, who helped build up and then sell Virgin Media in 2013.

The deal is the fourth big telecoms deal in Spain in the last 18 months, after Vodafone bought Ono, Orange snapped up Jazztel and Euskaltel last week agreed an offer for R Cable.

O’Hare told Reuters he saw Monday’s deal as a strategic move which would give it an opportunity to be involved in any further consolidation in the sector.

Founded in 1995 and supplying TV, broadband, fixed and mobile telephony, Telecable has more than 162,000 residential and corporate customers, giving it revenue of 131 million euros and core earnings of 63 million in 2014.

It was owned by Carlyle Group and Liberbank.

With Telecable surviving the economic downturn to grow revenue every year for the last five years, O’Hare believes it is set to grow revenue and earnings more rapidly.

He plans to expand it into the business sector, ramping up available speeds and pushing the supply of mobile and pay-TV services to existing customers, a tactic which worked well with Virgin in Britain.

The deal is the first acquisition for Zegona, which was set up to buy and run businesses in the European technology, media and telecoms sectors.

It will fund the acquisition with a combination of 251 million pounds ($390 million) of new equity, backed by institutional investors, funds from Zegona’s recent float and a debt facility arranged by Goldman Sachs.

The fundraising was backed by institutions including Capital and Fidelity. Marwyn, an existing investor, also backed the deal. ($1 = 0.6439 pounds) ($1 = 0.9062 euros) (Reporting by Kate Holton; Editing by Louise Heavens and David Holmes)

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