To look at this deal from back to front. . . .
UPC buys 25 pct in Telewest,enters UK
Monday June 26, 5:15 am Eastern Time
By Caroline Jacobs
AMSTERDAM, June 26 (Reuters) - Dutch-based cable television operator United Pan-Europe Communications NV (NasdaqNM:UPCOY - news) said on Monday it would take a 25 percent
stake in British cable company Telewest Communications Plc (quote from Yahoo! UK & Ireland: TWT.L), marking its entry into Britain.
The all-stock deal, part of a complex arrangement with parent company UnitedGlobalCom (NasdaqNM:UCOMA - news) (UGC), is worth about 3.8 billion euros ($3.54 billion) at UPC's Friday closing share price, analysts said. The value of the 724.3 million shares at Friday's close was 3.2 billion euros, an 18 percent premium.
UPC's share price rose on the news, with analysts saying the move into the British market was a good strategic choice for UPC, despite the share dilution resulting from the tie-up.
In exchange for the 25 percent stake in Telewest, UPC is issuing 128.2 million new shares, equal to about 27 percent of UPC, and giving them to UGC. That will increase UGC's stake in UPC to 61 percent from a current 51 percent.
UGC acquired its Telewest stake after it paid U.S.-based Liberty Media (NYSE:LMGa - news)(NYSE:LMGb - news) $200 million in cash for Liberty's international broadband assets, including the 25 percent Telewest stake.
Denver-based Liberty is headed by influential cable business player John Malone, former chief of Tele-Communications Inc.
Malone sold TCI to AT&T (NYSE:T - news) in 1999, but still runs the business separately from AT&T, holding investments in several cable programming ventures.
CHELLO ENTERS BRITAIN
The purchase comes after UPC earlier this month postponed for a second time the initial public offering of its chello broadband unit because it wanted to wrap up two alliance talks.
Analysts hailed the entry of chello into the British market as an important strategic move.
Telewest is Britain's second largest broadband communications provider, with some 1.2 million cable subscribers and 1.7 million fixed-line telephony subscribers, UPC said.
``From a geographic perspective it's a beautiful agreement -- they're setting foot in Britain, gain economies of scale and footprint,'' said Philip Scholte, analyst at Van der Hoop Effectenbank.
UPC shares rose 4.9 percent to 30.83 euros on the Amsterdam exchange, before settling back slightly to 30.05 euros by 0835 GMT, but still outperforming sector peers and the main AEX index.
Apart from cable TV, UPC provides telephony and high speed Internet access over its cable networks and the deal with Telewest expands the customer base for all its services. In addition, together with Telewest, UPC would be able to seal more link-ups.
Europe's largest cable operator in terms of number of customers has been subject to speculation it is in talks with Excite@Home (NasdaqNM:ATHM - news), a U.S.-based provider of Internet access and portal services.
UPC is present in 18 European countries and Israel. Microsoft Corp (NasdaqNM:MSFT - news) owns 8.0 percent of UPC's shares and is in the process of buying 29.7 percent of Telewest.
I believe MSFT increased its holdings in UPC to 12% a few weeks ago. And the significance of this deal is that MSFT is now a major cable player in Europe. And Liberty Media is trimming some fat. . . this is a powerful little company similar to CMGI. . . but with T as a parent. Also, it is important to note that T's offspring generally starts cutting deals in waves. . . and often over the summer.
Rande Is |
