Liberty Global in Acquisition Spree - Analyst Blog

A recent Bloomberg report revealed that Liberty Global Inc. (LBTYA), a leading global cable TV and diversified broadband services provider, is looking for more acquisitions in Germany. This time the possible target is Kabel Baden-Wuerttemberg GmbH & Co KG, the third largest cable operator in Germany with more than 2.3 million subscribers.

If the report is true, this will be Liberty Global's second major acquisition in Germany within a year after its acquisition of Unitymedia GmbH, the second largest cable TV operator in Germany.

Throughout 2010, Liberty Global has taken several strategic measures to restructure its operations. In January 2010, the company purchased Unitymedia for approximately $5.7 million. At the same time, Liberty Global sold its entire ownership interest in J:COM of Japan to KDDI Corp. for pre-tax net proceeds of approximately $3.1 billion. We believe management is pursuing further acquisitions in Europe with the proceeds of the disinvestment in Japan.

Germany is one of the most lucrative markets in Europe. The country sees growing demand for pay-TV services together with triple-play bundled services that combines basic cable TV, Internet and telephony. In the third quarter of 2010, Unitymedia has helped Liberty Global to increase revenue and customer base.

An initial estimation by Bloomberg predicts that the acquisition of Kabel BW may cost around $2.6 billion to Liberty Global. Kabel BW is a privately held cable MSO controlled by the Swedish private equity firm EQT Partners AB. The deal is subject to German regulatory approval.

Early this month, Liberty Global entered an agreement with London-based private equity firm Mid Europa Partners LLP to acquire Aster Sp. Z.o.o. for around $805 million. Aster is the fourth largest cable TV operator in Poland. The deal is subject to the approval of the Polish regulatory authority and is likely to close by mid-2011.

Libert Global's closest rivals are BT Group Plc. (BT), Eutelsat Communications, SES S.A. and CATV Systems. We maintain our long-term Neutral recommendation for Liberty Global. Currently, it is a short-term Zacks #3 Rank (Hold) stock.

 
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