Malone
BERLIN — Liberty Global expanded its reach into Germany on Friday by agreeing to buy Unitymedia from a private equity group in a E 3.5 billion ($5.2 billion) transaction.
Liberty Global, the largest broadband cable operator outside the U.S. in terms of subscribers with more than 23 million homes, agreed to the takeover of Unitymedia just as Germany's second-biggest cable network, owned by financial investors BC Partners and Apollo Management, was about ready for an initial public offering. Raymond Svider, co-chair of BC Partners, said it was literally a last-minute deal as Unitymedia was planning to announce the IPO on Friday.
Liberty Global, part-owned by John Malone, said it will pay $3 billion for Unitymedia and assume its debt of $2.2 billion.
In New York, Liberty Global's share price tumbled on the news, falling more than 9% to $20.93 early in the session as many questioned whether the future growth in Germany was bright enough to justify that much coin.
The private-equity group had acquired Unitymedia in 2003 for $2.2 billion. BC is believed to own about 35% of Unitymedia while Apollo owns 31%, and smaller stakes are held by funds such as Och-Ziff Capital Management. Unitymedia managers hold about 6%.
Unitymedia has 4.5 million subscribers, of which 470,000 are digital pay TV subscribers, 877,000 customers for broadband Internet and 535,000 subscribers for landline phone service in a region covering 10 of the country's 20 biggest cities — including Cologne, Dusseldorf and Frankfurt.
Liberty Global — formed in 2005 by the merger of Europe's then-largest cabler UnitedGlobalCom and Malone's Liberty Media Intl. — operates in Austria, the Netherlands, Eastern Europe, Asia and Latin America. It had shied away from Germany until now because of regulatory complications.
Malone tried without success to make inroads into Germany seven years ago but was tripped up by regulatory hurdles.
Unitymedia topper Parm Sandhu said Liberty Global made its approach just three weeks ago. He said they spent a week looking at the business before making the offer. The deal is expected to close in the first half of 2010, subject to regulatory approval.
"It's great for Unitymedia," Sandhu said. "We're bringing on board a strategic investor and becoming part of the world's largest cable company. That puts us in a very good position to compete with the likes of Deutsche Telekom, Vodafone and Sky Deutschland."
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