March 9th, 2010
German KDG 1Bn IPO to proceed in March
German KDG €1Bn IPO to proceed in March: Reuters 09.03.10 Daisy Ku
LONDON, March 8 (Reuters) - German cable television firm Kabel Deutschland's prospectus for its $1 billion share float now makes a trade sale very unlikely as private equity owner Providence seeks to maintain a majority stake, sources said. KDG said on Monday bookbuilding on Germany's biggest initial public share offer since Hamburger Hafen und Logistik's $1.7 billion issue in 2007 could start as early as March 11, the strongest indication yet that a trade sale will not be pursued. "It won't switch to a trade sale now," said one source familiar with the situation, while another said: "Providence will maintain a majority stake in KDG".
KDG's existing shareholders are to offer a combined 25-30 percent stake, giving the firm an equity value of 2-3 billion euros ($2.7-$4.1 billion), the sources said. Including debt, that equates to an enterprise value of 5-6 billion euros, in the same range as the 5 billion to 5.5 billion-euro price tag supposedly offered by private equity firms. Private equity players have speculated, even after KDG announced its IPO plan on Feb. 23, that the deal could turn into a last-minute trade.
Fellow German cable operator Unitymedia, which had also planned an IPO, was bought by Liberty Global in November but the second-biggest cable firm in Germany had not reached the stage of a published prospectus. The KDG prospectus said as many as 45 million shares could be sold and the sellers were expected to raise 700 million euros from the transaction. Sources close to the IPO said existing shareholders were not planning to sell 45 million shares, or 50 percent of KDG -- the maximum number of IPO shares stated in the prospectus. KDG reported a 13.8 percent rise in adjusted earnings before interest, tax and depreication (EBITDA) to 486 million euros for the nine months to end-December 2009. Analysts expected the IPO to put KDG on an enterprise value of 7-8 times forecast EBITDA for the year to March 2011, in line with the valuation at which Unitymedia was sold. The move came despite the withdrawal last month of more than $4 billion worth of IPOs by private equity-backed companies New Look, Merlin Entertainments and Travelport, with equity investors fearful of poor performances by companies saddled with big debts. Since the proceeds from the IPO will go to existing owners, KDG's net debt to EBITDA will remain at 4.5 times. Providence owns 88 percent of Kabel Deutschland. The other shareholders include the Ontario Teachers' Pension Plan, holding 8 percent, and management, with 4 percent.
KDG shares will be priced on March 19, with trading on the Frankfurt Stock Exchange to begin on March 22. The deal is being arranged by Deutsche Bank , Morgan Stanley, J.P. Morgan and UBS ($1 = 0.7307 euros) (Reporting by Daisy Ku)