Liberty’s Big Belgian Buy

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Liberty Global chairman John Malone made his global ambitions further known last week when the international cable giant launched a $2.5 billion bid for the 50% of Belgian cable operator Telenet that it doesn’t already own.

Liberty has owned a controlling stake (50.4%) in Telenet since 2007. The deal, valued at 35 Euros per Telenet share ($45.34) represents a 14% premium to the Belgian MSO’s average closing price during the past month

Liberty Global is the largest international cable operator, with about 20 million subscribers in 13 countries, mostly in Europe. The addition of Telenet’s 2.2 million customers would further solidify its dominance on the continent.

Telenet said in a statement its board of directors would evaluate the proposal and its independent directors would appoint an outside expert to value the offer.

In a research note, ISI Group analysts Vijay Jayant and David Joyce wrote the deal makes strategic and financial sense. They estimated it could take up to eight weeks to go through the necessary approvals and close a deal.

“Over the last three years, Liberty has made a conscious effort to dispose [of] assets outside Europe while acquiring assets in Europe (particularly in Western Europe),” the analysts wrote. “This is another step towards that goal.”

The analysts added that consolidating operations in the Benelux region could help drive an estimated $65 million in savings.

“We believe this is the right time for Telenet to become a wholly- owned part of Liberty Global’s pan-European platform in its next stage of development, particularly in light of the competitive and regulatory outlook in Belgium,” Liberty Global CEO Mike Fries said in a statement. “We are proud of the success Telenet has achieved over the years and of the many innovations it has brought to Belgian consumers.

“As a long-term, industrial player in European cable, this shows our commitment to the Belgian market,” Fries added. “Telenet is one of our most successful operations and a core part of our growing pan-European platform. We remain very supportive of the existing management team and employees at Telenet, all of whom have contributed to the company’s success. We will continue our focus on investments and product innovation in Belgium.”

Liberty Global is being advised by Morgan Stanley & Co Limited and Freshfi elds Bruckhaus Deringer LLP in connection with the offer.

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