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Liberty Global Aims to Expand with Cable & Wireless Buyout

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U.K. cable TV behemoth Liberty Global plcLBTYA has reached an agreement to buy Caribbean cable operator - Cable & Wireless Communications Plc. - for approximately $8 billion, including debt.

The Deal in Details

As per terms of the agreement, Liberty Global will acquire Cable & Wireless for a total equity value of approximately 3.5 billion pounds ($5.3 billion). Liberty Global will pay 78.04 pence per share of Cable & Wireless, which is at a premium of roughly 6% to Cable & Wireless' closing price as of Nov 13, 2015.

Further, Cable & Wireless' shareholders would receive a special dividend of 3.00 pence per share, when the transaction closes, taking the total consideration to 81.04 pence a share. Meanwhile, as of Sep 30, 2015, Cable & Wireless had long-term debt of $2.7 billion.

Notably, subject to necessary conditions and approvals, Liberty Global expects the deal to close in the second quarter of 2016.

Rationale Behind

Cable & Wireless boasts over six million subscribers and offers quad-play bundled services including video, broadband data (Internet), landline phone and wireless service in the Caribbean, Panama, Monaco and the Seychelles. The company recorded revenues of $1.8 billion in its last fiscal, which ended in March.

The acquisition of Cable & Wireless will thus enable Liberty Global to boost its rapidly-growing operations in Latin America and the Caribbean region. Also, Liberty Global aims to gain from Cable & Wireless' extensive network of undersea cables in the region, which should let Liberty Global benefit from the rapid increase in broadband data consumption. Further, the combined operations will help Liberty Global achieve economies of scale.

Benefits

Upon completion, the combined business will serve 10 million video, data, voice and mobile subscribers, with top positions across multiple markets, creating the leading consumer and B2B communications provider in Latin America and the Caribbean.

Moreover, the combined business is estimated to deliver low double-digit rebased operating cash flow (OCF) growth over the medium term. Also, together with the significant synergy prospects, the combined operations will build additional consolidation opportunities throughout Latin America and the Caribbean.

Our Take

Notably, Liberty Global has been looking to offer quad play bundled services in all the company's territories across Europe, Latin America and the Caribbean for long. In this regard, the company was in talks with U.K. telecom giant Vodafone Group Plc VOD concerning a series of transactions such as global asset swaps. However, the merger negotiations came to an end after both the companies failed to reach an agreement on valuations.

We believe the acquisition of Cable & Wireless would thus allow Liberty Global to offer the much desired quad-play bundled services thereby broadening its presence in the Caribbean and Latin American region.

Also, the acquisition offers striking organic growth opportunities and the combined business should aid the company in capitalizing on underlying untapped need for broadband, pay TV and mobile products and thereby propel customer take-up.

Liberty Global currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Salem Media Group, Inc. SALM and Sinclair Broadcast Group, Inc. SBGI . Both the stocks sport a Zacks Rank #1 (Strong Buy).

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LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

SINCLAIR BROADC (SBGI): Free Stock Analysis Report

SALEM COMM (SALM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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