Liberty Global Plc (LBTYA) has revived talks to acquire Dutch broadband provider Ziggo NV (ZIGGO) as Europe’s largest cable company -- controlled by U.S. billionaire John Malone -- expands its footprint in the region.
Ziggo said in an e-mailed release today “it is currently in discussions with Liberty Global regarding a potential offer” after Bloomberg News, citing people familiar with the matter, reported one was being prepared. Liberty Global may make a bid before the end of this year, the people said, asking not to be identified because no final decision has been made.
Ziggo rose as much as 10 percent and closed at 32.50 euros, up 5.4 percent in Amsterdam, the highest close since the company went public in March 2012. The stock may be worth 37 euros in a deal, according to Matthijs van Leijenhorst, an analyst at Kepler Cheuvreux in Amsterdam, meaning Malone would have to offer about 5.3 billion euros ($7.3 billion).
The Dutch company earlier this year rejected a full takeover bid from Liberty Global as inadequate. European cable and fixed-line broadband providers are attracting deals as growth from mobile-phone services slows. Vodafone Group Plc acquired Germany’s largest cable provider, Kabel Deutschland Holding AG (KD8), for more than $10 billion in October to add a fixed-line business in its largest market. In the Netherlands, Liberty Global also owns the UPC cable business.
“A merging of UPC and Ziggo makes perfect sense and if you look at the synergies they are perfect,” said Van Leijenhorst.
Marcus Smith, a London-based spokesman for Liberty Global, declined to comment.
“There is no certainty that any agreement can be reached or that any offer will ultimately be made,” Ziggo, based in Utrecht, Netherlands, said in its statement.
Shares of Ziggo, which has also started selling mobile-phone services, have gained more than two-thirds since the company’s initial public offering. The stock is up 31 percent this year in Amsterdam trading.
Ziggo will be led by Rene Obermann, who will step down as Deutsche Telekom AG (DTE)’s chief executive officer at the end of this year. Obermann has said he wanted to be “closer to the engine room.” A takeover of Ziggo by Liberty Global would make the 50-year-old manager of one of Malone’s European divisions.
Malone, who famously sold the U.S. cable company Tele-Communications Inc. to AT&T Inc. for $59 billion in 1999, has been busy the past decade amassing a European pay-TV empire that’s bigger than anything he ever owned back home. Liberty Global today is the biggest cable company in the region and is on track to report 2013 sales of almost $15 billion, data compiled by Bloomberg show.
Though Europe has thousands of cable companies for Liberty Global to buy, there are few large players left, and lately a new level of competition has arisen from telecommunications providers such as Vodafone and Deutsche Telekom. Cable companies, formerly restricted to broadcasting television signals, have added services like Internet and wireless in recent years, bringing them into full competition with Europe’s carriers.
Liberty Global in June lost out to Vodafone in bidding for Kabel Deutschland -- in part because Liberty Global already had assets in the country and would have run into antitrust issues. Vodafone in October completed the 7.7 billion-euro takeover of the German operator and has emerged as a formidable new rival since selling its stake in Verizon Wireless for $130 billion.
Revived talks with Ziggo could be viewed as a move to keep Vodafone and other companies such as Deutsche Telekom out of the Dutch cable industry, said Francesco Radicati, an analyst at Informa Telecoms & Media in London.
“I can see this as a defensive move on Liberty’s part to make sure Ziggo doesn’t get snapped up by another mobile player, like how they lost Kabel Deutschland to Vodafone,” he said.
The timeline for a bid could slip into 2014, and Liberty Global could also opt against proceeding with a full offer, the people familiar with the matter said.
“We clearly are looking long term about the possibility of a combination,” Liberty Global Chief Financial Officer Charles Bracken said Nov. 20 at an investor conference in Barcelona. “There are clearly synergies, however Liberty is very disciplined about prices.”
Liberty Global has sought to extend its reach in Europe this year, acquiring the U.K.’s Virgin Media Inc. for about $16 billion. Back at home, Malone re-entered the U.S. cable market in May when his Liberty Media Corp. (LMCA) paid $2.6 billion for 27 percent of Charter Communications Inc., the fourth-largest U.S. cable operator. As part of the deal, Liberty Media agreed not to raise its stake in Charter above 40 percent.
With a net worth of $7.1 billion according to the Bloomberg Billionaires Index, Malone chairs three publicly traded companies: Liberty Global, Liberty Media and Liberty Interactive Corp. Liberty Media holds shares in various media outlets and Interactive owns the QVC home-shopping network and stakes in TripAdvisor Inc., Time Warner Cable Inc. and Expedia Inc.
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