Ziggo NV (ZIGGO), the Dutch cable company owned by Warburg Pincus LLC and Cinven Ltd., rose 15 percent on the first day of trading after its initial public offering raised 804 million euros ($1.1 billion) with shares sold at the top end of its price range.
Shareholders of Ziggo sold 43.5 million shares at 18.50 euros each, the Utrecht, Netherlands-based company said in a statement yesterday. Ziggo rose as much as 3.45 euros to 21.95 euros a share in Amsterdam trading before retreating to close at 21.25 euros. The IPO is the biggest in Europe so far this year, according to data compiled by Bloomberg.
“Today’s movement reflects the strong demand for the cable industry,” Nick Brown, a London-based analyst at Espirito Santo Investment Bank, said by phone. “There were obviously some disappointed investors that weren’t able to get as many shares as they would have liked in the IPO, or any at all. This bodes well for any future placings.”
Warburg and Cinven are taking advantage of Ziggo’s above-average profitability, and the cable company plans to pay 220 million euros in dividends this year to entice new investors. The company said on March 9 the new stock would be priced at 16.50 euros to 18.50 euros a share.
Cinven is making about 2.2 times its investment in the share sale, less than the 3.5 times that Warburg Pincus made on its money because it invested earlier, according to people with knowledge of the matter, who declined to be identified because the process is private.
Warburg Pincus bought the Dutch cable company Multikabel for $625.7 million in 2005, and later merged it with rivals Casema and Kabelcom, which Cinven helped Warburg buy for a combined enterprise value of $5.9 billion, according to Bloomberg data. The result of the merger, Ziggo, is now valued at about 7.5 billion euros ($9.95 billion) including debt, according to Bloomberg data. Officials at Warburg and Cinven declined to comment on returns.
Ziggo is the largest cable-television operator in the Netherlands with an estimated network coverage of 56 percent of the country’s easily connectable homes at the end of last year, according to its prospectus. It offers TV, digital pay TV, high-speed broadband internet and telephone services. Its main strategy is to offer packages of services at a lower price than customers would pay for the individual service subscriptions.
“We identified the Dutch cable market as an attractive and growing industry and then created a new national market leader,” Joseph Schull, head of Warburg Pincus in Europe, said yesterday in an e-mailed statement. “We also supported significant capital investment and an ambitious growth strategy,” he said.
Growth is expected to come from Ziggo’s entrance on the Dutch mobile market, planned for 2013, and from the corporate market where the company plans add-on acquisitions, chief financial officer Bert Groenewegen said in an interview today. This year, the company expects to see similar growth drivers to 2011, including a strong demand for triple play - television, phone and internet - and an increasing share in the corporate market, he said.
Ziggo, which competes with Royal KPN NV (KPN) in the Netherlands and Liberty Global’s UPC, increased the amount of stock in the offering to 43 million shares from 35 million shares originally planned, and added a 15 percent over-allotment option. If the over-allotment option is exercised in full, the IPO will represent 25 percent of the total issued share capital of Ziggo, the company said yesterday.
“This has been a classic ‘consolidate and build’ investment, with Ziggo expanding revenues and margins whilst delivering significant innovation to customers,” David Barker, a partner at Cinven, said in an e-mailed statement yesterday.
The share sale is the first IPO on the Amsterdam Stock Exchange in more than two years. Trading in the shares will start today.
Ziggo is among European companies seeking to sell shares as the region’s stock markets rebound. While the Stoxx Europe 600 Index retreated yesterday, the gauge has still gained 10 percent this year as the European Central Bank disbursed 1 trillion euros to the region’s lenders.
On March 19, DKSH Holding Ltd., a Swiss company that helps clients expand in Asian markets, raised 821 million francs ($900 million) through an IPO in Zurich.
Ziggo’s earnings before interest, taxes, depreciation and amortization rose to 835 million euros last year, or 56.5 percent of sales. That ratio, a gauge of profitability known as Ebitda margin, is 43.6 percent at Kabel Deutschland and 52.5 percent at Telenet, controlled by Liberty Global (LBTYA) Inc., according to data compiled by Bloomberg.
Ziggo won’t get any proceeds from the offering, according to the original IPO prospectus. Besides its private-equity owners, some executives and employees also planned to sell shares in the offering.