US-based, international cable operator Liberty Global agreed to buy today Germany's second-largest cable network company Unitymedia GmbH for $3 billion (€2 billion) in order to expand its existing European footprint.
Englewood, Colorado-based Liberty Global is also absorbing Unitymedia's $2.2 billion debt, taking the total value of the acquisition to $5.2 billion excluding transaction costs, the company said in a statement.
Cologne-based Unitymedia is the largest cable television operator in the German federal states of North Rhine-Westphalia and Hesse and the third largest cable operator in Europe, as measured by the number of television subscribers.
The cable television operator runs its operations in 10 of Germany's biggest 20 cities, including Frankfurt, Cologne and Dusseldorf with a population of over 24 million people, an area producing about one third of Germany's GDP.
In addition to analog cable services, Unitymedia is a leading provider of integrated triple play services, driving subscriber growth across digital television, broadband internet and telephony. As of 30 September 2009, Unitymedia had approximately 4.5 million cable subscribers.
Private equity firms BC Partners of the UK and New York-based Apollo Management LP, hold a majority stake in Unitymedia.
With 2008 revenue of $10.5 billion, Liberty Global formed in 2005 from the merger of Liberty Media and UnitedGlobalCom, operates in 10 countries in Europe, and is the largest cable operator in Poland, Switzerland, Belgium, Austria , Slovakia, Hungary and Czech Republic.
In the Americas, Liberty Global's operations consists of Liberty Cablevision, a provider of pay TV, while Puerto Rico, it runs internet, and telephone services and television, telephone and internet services through VTR Chile, in Chile.
It also has a 50-per cent stake in MGM Networks in the US through Europe-based Chellomedia.
In 2002, Liberty Global had attempted to enter the German market by proposing to acquire the entire cable networks of Deutsche Telekom for €5.5 billion, but was rejected by German regulators on monopoly issue.
Liberty Global said that it will acquire 100 per cent of the shares of Unitymedia for an equity purchase price of $3.0 billion, from a group of shareholders led by BC Partners and Apollo.
The company further added that the transaction represents a purchase price multiple of approximately 7.4 times its estimate of Unitymedia's 2010 Adjusted EBITDA1 under IFRS accounting standards. Completion of the transaction is expected to occur in the first half of 2010 and is subject to regulatory approval.
In respect to financing the transaction, Liberty Global will target debt financing on Unitymedia's business of approximately $3.7 billion, of which the net proceeds, after refinancing Unitymedia's existing debt and transaction costs, will be available to fund a portion of the equity consideration.
The remaining equity purchase price would be funded by a combination of existing liquidity, proceeds from the sale of $750 million in convertible notes and the sale of 6 million Series A and C shares to SPO Partners & Co for about $128 million.