Liberty Global to buy Cable & Wireless for €5bn

Liberty Global CEO, Mike Fries.

Liberty Global has agreed to buy Cable & Wireless Communications (CWC) for £3.5 billion (€5.0 billion) in a “watershed” move to expand its presence in the Caribbean and Latin America.

Liberty has agreed to buy all outstanding shares in CWC and combine it with its LiLAC operations – Liberty’s LatAm and Carribean assets that already comprise Chilian operator VTR and Puerto Rican operator Cablevision.

Announcing the deal, Liberty Global CEO Mike Fries said the combined business will serve 10 million video, data, voice and mobile subscribers and have “leading positions across multiple markets”.

“The acquisition of Cable & Wireless represents a watershed moment for our recently created LiLAC platform. It will add significant scale and management depth to our fast-growing operations in Latin America and the Caribbean, while creating a new regional consumer and B2B powerhouse,” said Fries.

Liberty estimates that the combined company would have generated estimated consolidated revenue of more than US$3.5 billion and operating cash flow (OCF) of US$1.4 billion for the twelve months ended September 30, 2015.

Following completion of the deal, Fries predicted “low double-digit rebased OCF growth over the medium term.”

Under the terms of the deal, the LiLAC Group will be approximately 25.4% owned by existing LiLAC Group shareholders and 7.2% owned by existing CWC shareholders, with the remaining 67.4% represented by an “inter-group interest” held by Liberty Global.

Liberty Global said that “no decision has been made as to whether the LiLAC businesses would be spun-off” – a move that was anticipated by many industry watchers after Liberty launched its LiLAC tracking stock on July 1 of this year.

The offer price of 81.04 pence per CWC share represents a purchase price multiple of 10.7 times CWC’s EBITDA for the year ending September 30, with Liberty also due to assume CWC’s existing debt, which stood at US$2.7 billion as of the same date.

Liberty Global first confirmed it was in talks to buy CWC last month. Liberty Global chairman John Malone already owns a 19% stake in Cable & Wireless as a result of its acquisition of Columbus International, the Caribbean and Central American telecom group.

Completion of the deal is subject to Liberty Global and CWC shareholder approvals and regulatory approvals.