Warburg Pincus backs Polish cable roll-out

The US-headquartered firm will help INEA provide fibre technology to 200,000 new households, in what is said to be Poland’s largest deal this year.

Warburg Pincus, the US-headquartered growth investor, has bought a minority stake in Polish cable operator INEA. 

The size of the acquired stake was just under 50 percent, with INEA’s founders retaining majority ownership of the company, a source close to the matter said. 

No financial details were disclosed for the deal, but Warburg’s statement noted it was Poland’s largest private equity investment so far this year. Warburg declined to comment on transaction terms. 

INEA is the fourth-largest cable operator in Poland, and the biggest provider of triple-play bundles (comprising high-speed internet, telephone and television) in the Wielkopolska province, the country’s third-largest with a population of 3.4 million. The company generated revenues of PLN 169 million (€41 million, $53 million) last year. 

INEA is Poland's
fourth largest 
cable operator

Warburg intends to support the company in the roll-out its fibre technology services across Wielkopolska, in a move expected to connect 200,000 new households, as well as a number of new businesses, to the region’s high speed broadband distribution network. This will involve partnering with local authorities to build around 4,000 km of fibre optic network, with a view to serve up to 500,000 homes upon completion of the upgrade. 

While scaling-up the business was the immediate focus of Warburg’s investment, opportunities for buy-and-build plays could materialise in the future, Paul Best, a managing director at Warburg, told Private Equity International. “There are around 15 operators just in that province, and there are half a million homes that have no cable at all. And there are a lot of national players as well. So over the longer term acquisitions is something that we will think about.” 

We’re moving away from just a straight auction, into a dialogue where we can construct a much more bespoke transaction

Paul Best

The firm has had fruitful involvements in the sector in the past, through its previous cable investments in Europe, the US, the UK and various CEE markets. Its exits from Ziggo, a Dutch operator it formed by combining three smaller regional players, generated an overall return of more than 4x last year. 

Warburg is also familiar with Central and Eastern Europe, having invested close to $1 billion in the region since inception. It continues to see Poland as an attractive private equity market – but also one where increasing competition in auction processes meant that good returns were more likely to be achieved through minority strategic investments, Best explained. 

“When you have an attractive business sold in a straightforward auction, it can be very competitive which has an impact on valuation. But here we’re moving away from just a straight auction, into a dialogue with the management team and founding shareholders where we can construct a much more bespoke transaction.”

Warburg is currently a minority shareholder in AmRest, a restaurant operator listed on the Warsaw stock exchange. Its past investments in the CEE include pharmaceutical group Zentiva and healthcare provider Euromedic, which it respectively exited in 2006 and 2008.  

INEA was an investment by Warburg’s Fund XI, which the firm is currently raising with a target of $12 billion. The vehicle had garnered $7 billion in commitments as at February 2013, according to Private Equity International’s Research and Analytics’ division.