Liberty Global plc. (LBTYA - Analyst Report), a leading cable TV operator in Europe and Latin America, is all set to fortify its foothold in the core North European markets. Yesterday, the company declared that it has reached an agreement to acquire a 100% stake in Ziggo N.V., the largest cable MSO (multi service operator) in the Netherlands.
At present, Liberty Global holds a 28.5% stake in Ziggo. The deal is expected to close by the second half of 2014, subject to regulatory approval.
Liberty Global will pay approximately $13.7 billion to acquire the remaining 71.5% stake of Ziggo including its outstanding debt. The deal will be completed through a stock and cash transaction.
Per the deal, each Ziggo shareholder will receive €11.00 in cash, 0.2282 Liberty Global Class A ordinary shares and 0.5630 Liberty Global Class C ordinary shares. Based on Liberty Global’s Class A share price of $83.27 and Class C share price of $78.80 as of Jan 24, 2014, the Offer translates into a price of approximately €34.53 per Ziggo ordinary share.
Liberty Global already has a strong presence in the Dutch cable-TV market as its UPC Broadband Holding BV unit is the second largest cable MSO in the country.
A merger between Liberty Global and Ziggo will create a dominant cable TV operator in the Netherlands with approximately 10.8 million revenue generating units. Ziggo also competes with telecom operators such as Royal KPN N.V. and Vodafone Group plc. (VOD - Analyst Report).
Liberty Global is trying to extensively penetrate the European region with its bundled video, voice and Internet (data) services. The European markets are still relatively untapped for this unique triple-play offering.
A recent Bloomberg report stated that the company may consider the divestment of its Latin American operations. Liberty Global’s Latin American operations include VTR Internet and wireless businesses in Chile and its 60% share in Liberty Cablevision of Puerto Rico.
In Jun 2013, Liberty Global acquired a 100% stake in the British cable MSO, Virgin Media. In the U.K., the merged entity poses serious competitive threat to British Sky Broadcasting Group plc and BT Group plc. (BT - Snapshot Report).
British Sky Broadcasting Group is the largest pay-TV operator in the U.K. and is partially controlled by News Corp. (NWSA - Analyst Report). Currently, Liberty Global has a Zacks Rank #3 (Hold).
Share Repurchase Program
Yesterday, Liberty Global also announced that its board of directors has authorized a $1 billion increase to its two-year $3.5 billion stock repurchase program. Total share buy-back program now stands at $4.5 billion of which $700 million has been utilized through Sep 30, 2013. The rest of the funds will be utilized by mid 2015 or end 2015.