Liberty Global said it will buy Cable & Wireless in a complicated deal that will also give the European cable operator a larger stake in its Caribbean tracking stock, Liberty Latin America and Caribbean (LiLAC).
The acquisition of Cable & Wireless isn’t a surprise – Liberty said it was in talks with the company in October. But in a complicated series of transactions, C&W shareholders have the option of accepting Liberty Global or LiLAC shares in exchange for their own.
According to a statement, Liberty Global values C&W at about $5.3 billion. The price is a 40% premium to C&W’s share price on Oct. 21. Liberty Global said under the terms of the offer, it will issue a maximum of 31.7 million Liberty Global Class A shares, 77.5 million Liberty Global Class B shares, 3.6 million Liberty Latin America and Caribbean Class A shares and 8.9 million Liberty Latin America and Caribbean Class C shares.
The deal also will give Liberty Global a majority of LiLAC equity, Morgan Stanley media analyst Ben Swinburne wrote in a note to clients.
Liberty spun off LiLAC as a tracking stock in July to unlock the value of its Latin America assets, previously held within Liberty Global. The deal also helped turn Liberty Global into a pure-play European cable company.
“Pro forma for the proposed deal, current LiLAC shareholders would own 25-26% of LiLAC, 7-8% would be owned by current [Cable & Wireless] shareholders, and the remaining 67-68% by Liberty Global Group,” Swinburne wrote. “In aggregate, we estimate that LiLAC will need to issue [about] 129 million shares, which compares to roughly 44 million shares outstanding today.”
In a statement, Liberty Global CEO Mike Fries said the C&W transaction was a watershed moment for LiLAC, addin gsignificnat scale -- it will have about 10 million subscribers -- and create a new regional consumer and B2B powerhouse.
“With our long track record of strong operational and financial performance in the region, we are confident that this combination will yield substantial synergies and accelerate our current prospects for the LiLAC Group to low double-digit rebased OCF growth over the medium term," Fries said in the statement. "Our high-quality networks and commitment to product innovation will provide the foundation for growth and value creation for both Liberty Global and LiLAC shareholders. Upon closing, the combined LiLAC and CWC businesses will benefit from the broader group's scale and management expertise.”