The $6bn merger of UK cable giants NTL Inc and Telewest Global Inc continues to pique the interest of financial institutions, after reports emerged that two more private equity firms had joined a consortium lining up for the merged entity.
NTL agreed to acquire its smaller rival Telewest for $6bn in cash and stock at the start of October. But days later speculation began that a group of private equity firms was considering a bid of more than $11bn for both the UK cable operators.
Kohlberg Kravis Roberts and Providence Equity Partners have reportedly joined with Blackstone Group and Cinven to table a formal bid. It is understood that each company would invest an equal amount of equity when NTL and Telewest complete their merger, expected to be in the first quarter of 2006.
It is thought the private equity group is not interested in trying to acquire NTL and Telewest separately ahead of their merger, due to the complexity of such a transaction.
What makes NTL and Telewest such an attractive proposition is that once merged, it will be the UK’s second largest communications company with 4.3 million subscribers and combined revenues of 3.4bn pounds ($5.9bn). The combined company will have nearly 5 million residential customers, 2.5 million broadband subscribers, and 3.3 million pay TV subscribers.
For years there was talk of a merger between NTL and Telewest, but financial problems delayed their inevitable marriage. Both US-quoted companies discovered they had insufficient cash to get through to profitability. NTL went into Chapter 11 bankruptcy protection and Telewest Communications Plc underwent a restructuring that saw its bondholders receive 98.5% of the company’s shares.
Both Telewest and NTL offer triple-play (telephone, broadband, and pay TV) services, but the financial turmoil took their toll and there is little doubt that both Telewest and NTL have slipped behind BT Group Plc for fixed-line services, and British Sky Broadcasting Group Plc for pay-TV.
The speculation of financial institutions acquiring the UK cable operators, comes after Spanish cable operator Grupo Corporativo Ono SA, along with a consortium of investors, opted to pay 2.25bn euros ($2.75bn) in August for the fixed-line telephone and cable unit of Auna Telecomunicaciones SA, Spain’s second largest telecoms group.
In September, Switzerland’s largest broadband cable company Cablecom Holdings AG was acquired by US cable TV giant Liberty Global Inc for $2.18bn, a move that halted Cablecom’s plans to float the business.