UPC gets EUR 1 bln from Liberty; Telewest deal off
(UPDATE: Adds bond market reaction in para 6, updates shares para 5)
By Jana Sanchez
AMSTERDAM, Feb 23 (Reuters) - Europe's biggest cable network operator UPC said on Friday it had secured one billion euros ($900 million) funding from its parent company, strengthening its capital base and boosting the ownership position of parents UnitedGlobalCom (UGC) and Liberty Media.
The deal will help provide the funds UPC needs to roll out a major expansion in digital services and reassure investors about its continuing ability to raise money.
UPC (NasdaqNM:UPCOY - news) said it would launch a 1.0 billion euro rights issue, supported by UGC (NasdaqNM:UCOMA - news), as a replacement deal for its original plan to buy 25 percent of Britain's Telewest (quote from Yahoo! UK & Ireland: TWT.L) from Liberty (NYSE:LMGa - news) -- a plan rejected by UPC bondholders.
Under the new deal, Liberty would inject $1.4 billion in cash into UGC, which would in turn buy 1.0 billion euros of UPC (United Pan-Europe Communications) shares, said UPC spokesman Manuel Kohnstamm.
Shareholders liked the deal, sending UPC's shares as high as 10.55 euros in early trade, up almost nine percent. The shares settled at 10.05 euros by 1105 GMT, a 4.1 percent rise.
The bond market also welcomed the news, sending UPC's most liquid bond five points higher to 77 percent of face value from 72 percent on Thursday, dealers said.
``As long as UPC can continue to attract capital, that's positive,'' said Kempen & Co fund manager Peter Bekius. UPC's share price and public image in the Netherlands have been under assault as worries persist over its ability to raise enough money needed to fund its aggressive rollout of digital services.
``It definitely helps UPC as it shows they are addressing the funding gap,'' said one London-based analyst who declined to be named. ``It's much better than the Telewest deal...but UPC still has a funding gap of about 2.5 billion euros.''
Analysts said the money would be used to fund UPC's current business plan, rather than for fresh expansion.
LIBERTY SUPPORT REASSURES
If no other UPC shareholders take up the rights issue, Kohnstamm said, UGC's stake in UPC would increase from its current 51 percent to about 60 percent.
Friday's deal also amends a deal struck between UGC and Liberty last June, Kohnstamm said.
After the completion of the complex deal between UGC and Liberty, Liberty will have a 43 percent economic and a 81 percent voting stake in UGC, according to a statement issued by Liberty and UGC, effectively giving Liberty control of UPC.
Analysts said Liberty's support of UPC was reassuring, as the heavily indebted UPC strives to raise money to fund the upgrade of its networks.
Other shareholders could take up the rights offering, meaning UPC could raise up to 1.5 billion euros. Fund managers and analysts said, however, that heavy takeup by non-UGC/Liberty shareholders was unlikely.
LIBERTY IN GERMANY
Analysts also said it was likely that Liberty's expansion into Germany would ultimately involve UPC.
Liberty, which said on Friday that it was putting together a consortium to buy cable assets from Deutsche Telekom in Germany, would probably eventually put those assets into UPC, which it now controls.
``Liberty will inject those assets into UPC -- it would make perfect sense,'' said one analyst. ``They have to do something with them (the German cable assets). In the long run they belong with UPC.''
Liberty, which will still own the 25 percent stake in Telewest, would be unlikely to use Telewest as a vehicle to develop those German assets, the analyst said.
Britain's NTL (NYSE:NLI - news) is seen as the ultimate recipient of that Telewest stake, but is unlikely to come up with the cash or paper to buy it right now, analysts said. |
