TDC to Buy Norway Cable Provider Get AS for $2.2 Billion

TDC A/S agreed to acquire cable provider Get AS for 13.8 billion kroner ($2.2 billion) to become Scandinavia’s biggest TV-cable company by revenue.

TDC will finance the deal by selling debt, Chief Financial Officer Pernille Erenbjerg said in an interview today. Denmark’s largest telephone company will cut its dividend payout by a third to maintain its investment-grade rating after paying 10.5 times Get’s estimated earnings for next year. TDC fell as much as 8.2 percent in Copenhagen, where it is based.

TDC, which will have 1.7 million cable customers after gaining half a million from Get in Norway, is the latest European carrier to turn to landline and cable assets as it struggles to lift revenue as Nordic competition grows tougher and regulatory restrictions increase. Vodafone Group Plc and Deutsche Telekom AG have made acquisitions in Germany, Spain and Poland in the past two years.

Get competes with larger state-controlled Telenor ASA for broadband and TV services, as well as Stockholm-based TeliaSonera AB. Gunnar Evensen will continue to lead Get after the deal, which is expected to be completed in the fourth quarter, TDC said. The company will have total cable sales of 7 billion kroner following the deal.

TDC shares fell 7.5 percent to 42.93 kroner at 1:13 p.m., giving the carrier a market value of about 34.8 billion kroner.

Debt Level

TDC’s debt is rated Baa2, two steps above junk, at Moody’s Investors Service and has similar BBB grades at Fitch Ratings and Standard & Poor’s. TDC has total debt of almost $4 billion, according to data compiled by Bloomberg.

The company’s debt rating will probably be cut by one step to the lowest investment grade after the acquisition, analysts including Rick Mattila at Mitsubishi UFJ Securities International Plc said in a note.

“We are very focused on keeping our investment grade rating and the financing has been structured in a way where we think it’s possible,” Erenbjerg said.

TDC said it’s paying about 10.5 times Get’s estimated earnings before interest, taxes, depreciation and amortization for next year. Including projected annual synergies of 185 million kroner by 2017, the ratio drops to 9.3 times.

The median paid for other cable and satellite deals in the past five years is about 6.4 times, according to data compiled by Bloomberg.

Dividend Cut

The level of debt to TDC’s Ebitda is expected to rise to around 2.9 times, Erenbjerg said. That compares with a previous goal of holding debt at no more than 2.2 times. Erenbjerg said the higher level of debt will be “OK” for a combined telecommunication and cable carrier after TDC cuts its dividend payout to 60 percent of equity free cash flow from 90 percent. The dividend will stay at the lower level for the foreseeable future, Erenbjerg said.

Get has been owned by Goldman Sachs Group Inc.’s buyout unit GS Capital and Quadrangle since a 5.8 billion-kroner buyout from Candover Partners Ltd. in 2007.

Buyout firms Charterhouse Capital Partners LLP and EQT Partners AB were among bidders for Get, people with knowledge of the situation said this month. BC Partners Holdings Ltd., the London-based buyout firm, dropped out of bidding for Get, one person said.

JPMorgan Chase & Co. advised TDC on the deal, while Kromann Reumert provided legal assistance. Deutsche Bank AG advised Get.