Nov. 13 (Bloomberg) -- Liberty Global Inc., the cable company controlled by billionaire John Malone, agreed to buy Unitymedia GmbH for about 2 billion euros ($2.98 billion), gaining access to markets in 10 of Germany’s 20 largest cities.

Liberty Global will buy the second-biggest cable television operator in Germany from BC Partners Ltd. and Apollo Management LP, the private equity firms that control Cologne-based Unitymedia, and also assume about 1.5 billion euros of the company’s net debt, it said in a statement.

“It will be good for Unitymedia to be part of a bigger group,” said Stephan Haber, a credit analyst at Unicredit Group in Munich.

For Malone, 68, the purchase would mark a comeback after he was blocked by regulators from buying cable networks in Germany in 2002. With the deal, Liberty Global will get the largest cable operator in the states of North Rhine-Westphalia and Hesse, among Germany’s most prosperous and densely populated regions. Unitymedia provides cable services to 6.4 million subscribers in cities including Dusseldorf and Frankfurt.

Unitymedia “complements our existing European footprint and has significant untapped growth potential in one of the fastest-growing cable markets in Europe,” Mike Fries, Liberty Global’s chief executive officer, said in the statement.

Englewood, Colorado-based Liberty Global was spun off from Liberty Media Corp. in 2004 and owns cable systems in Europe, South America and Asia.

Last-minute Deal

BC Partners and Apollo were considering an initial public offering of Unitymedia as early as this year, two people familiar with the plans told Bloomberg News on Oct. 27.

“We were about to file the registration document for the IPO in Germany,” said Andrew Newington, a partner at London- based BC Partners, the largest shareholder of Unitymedia, with a 35 percent stake. “Liberty, which had been watching us closely and had been thinking about this deal for many years, approached us with a bid in the last two weeks and we came to an agreement in the very early hours of the morning.”

Unitymedia was planning a 500 million-euro stock sale, mostly of new shares, he said, adding that with an IPO “you never know if you’re ever going to achieve the value you’re targeting.” The private-equity firm will earn a 40 percent annual return from the sale to Liberty, he said.

“The deal may signal corporate buyers, who do have access to credit, are coming back on the M&A front,” he said. “More CEOs are thinking of mergers and acquisitions than a year ago.”

Unitymedia History

Unitymedia was created in 2005 with the merger of regional cable companies Iesy, Ish and Tele Columbus. The predecessor companies were sold by Deutsche Telekom AG in 2000. Kabel Deutschland GmbH is Germany’s largest cable operator.

The Liberty Global deal will strengthen Unitymedia, Parm Sandhu, its chief executive officer, said in a phone interview.

“This brings a much longer-term strategic perspective to the business, which I think is great,” he said. “It allows for much better competition.”

Unitymedia competes with the likes of Deutsche Telekom, Europe’s biggest phone company, and Rupert Murdoch’s Sky Deutschland.

“Before this deal was announced, there were already two dominant parties in German broadband market, Deutsche Telekom and the cable companies, and I don’t think this will change that significantly, ” said Unicredit’s Haber.

Deal Details

The greatest potential for Liberty Global would come from it acquiring more German cable assets, said Klaus Boehm, a director of media at Deloitte Consulting in Duesseldorf. The company would, however, also “face the greatest hurdles in getting approval from cartel authorities,” he said.

Shane O’Neill, Liberty Global’s senior vice president and chief strategy officer, said on a conference call today that the company has no plans currently for more German asset purchases.

Liberty Global said it’s paying about 7.4 times its estimate of Unitymedia’s 2010 adjusted earnings before interest, taxes, depreciation and amortization.

The transaction, which will add to earnings, is expected to be completed in the first half of 2010, subject to regulatory approval, it said in the statement.

The company said it will fund 2.5 billion euros of the purchase through debt, with rest financed through existing liquidity available to the group.

UBS AG, Morgan Stanley, Nomura Holdings Inc., HVB and Latham & Watkins advised Unitymedia, while Goldman Sachs Group Inc. advised Liberty Global.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt rkjetland@bloomberg.net; Anne-Sylvaine Chassany in Paris at achassany@bloomberg.net

Last Updated: November 13, 2009 10:54 EST