Warburg Pincus, Cinven and a group of co-investors have sold an additional 3 million shares in Euronext-listed Dutch cable operator Ziggo at a price of €24.75 per share.
The group exercised a 3 million overallotment option following the sale of 37 million shares last week, generating total proceeds of €915.8 million. The return generated from the sales could not be determined at press time, but Warburg Pincus and Cinven have already reaped returns of over 4x and 2.7x, respectively, from their investment in Ziggo. In July, the two firms netted €255 million each by selling 29 million shares in the business, and in March Ziggo raised €804 million in an initial public offering, the biggest IPO in Europe since July 2011.
Prior to the additional share sale Thursday, Cinven said it had generated total proceeds of €569 million for its investors, while Warburg said its gross proceeds stood at more than €590 million.
The two firms created Ziggo by jointly leading a process of consolidation in the Dutch cable market, which Private Equity International detailed in depth in a recent Deal Mechanic column. In December 2005, Warburg Pincus completed the acquisition of Multikabel, the fourth largest player, after a long and complex courtship. The following year, Kabelcom and Casema, the second and third largest companies, also came up for sale. Cinven, which had extensive experience in cable (primarily in France), had an existing relationship with Kabelcom's owner Essent, putting it at the front of the queue to buy that business. But the real opportunity lay in combining all three companies – and since neither Warburg Pincus nor Cinven could afford to do that alone, they decided to join forces. The result was Ziggo.
Although combining the three businesses created some major operational and logistical challenges, it also created plenty of cost-saving opportunities: the owners managed to strip out 'synergies' of €120 million a year, equivalent to about 20 percent of the cost base. But they also ploughed in more than €1 billion of capital expenditure on new technology, and managed to boost the top line by increasing revenues per user, primarily by expanding the number of people who subscribed to bundles (i.e. voice, data and TV). In the last couple of years, revenues and profits have been growing strongly.
Prior to Thursday’s offering, Warburg and Cinven each owned a 22 percent stake in Ziggo, worth more than €1 billion.
Warburg Pincus and Cinven were unavailable for comment at press time.