FLOW gets a new owner

John Malone

John Malone

John Malone’s Liberty Global Plc has agreed to buy Cable & Wireless Communications (CWC), the company which trades here as FLOW,  in a cash-and-stock transaction valued at 3.5 billion pounds (US$5.3 billion), extending the US billionaire’s European cable empire deeper into Latin America and the Caribbean with an eye for more deals in the region.

The deal represents a multiple of 10.7 times CWC’s adjusted annual earnings before interest, depreciation, taxes and amortization, after taking into consideration cost synergies, according to a statement. CWC shareholders will get a special 3 pence a share dividend at the deal’s close. The transaction is valued at 78.04 pence per CWC share, based on Friday’s closing price.

The purchase would give Malone a critical mass in Latin America, where he created a tracking stock in July called LiLAC for Liberty Global’s assets in Chile and Puerto Rico. Malone spent more than $50 billion the past decade amassing cable companies across Europe. Now, with Cable & Wireless, he is poised to do the same in faster-growing economies in Latin America, and may even spin off that unit in the future, people familiar with the matter said last month, when the companies announced they were in talks.

Cable & Wireless, which also owns a network in the Seychelles, received more than half of its $1.75 billion in revenue last year from Panama and the Caribbean. Malone became a shareholder last year when Cable & Wireless bought his cable TV and Internet provider Columbus International Inc. As part of that deal, Malone and the two co-founders of Columbus were given a 36 percent stake of the combined company.

Malone is using Liberty’s LiLAC Group tracking stock in the deal. Liberty’s businesses are attributed to two tracking stock groups: the Liberty Global Group, which comprises the company’s European operations; and the LiLAC Group, which comprises Latin American and Caribbean operations.

As part of the deal Liberty Global will take on CWC’s net debt, which was $2.7 billion as of Sept. 30, 2015.

Malone’s growing presence in Latin America and the Caribbean also dims the hopes for a revival of talks to combine or swap assets in Europe with Vodafone Group Plc. The two sides in September ended their own negotiations. While Malone has said Vodafone’s assets in Europe would be attractive, he said the two companies have different corporate cultures that would make a combination difficult.

Shares of Liberty Global fell 1.8 per cent to $44.54 at 2:14 p.m. in New York. Cable & Wireless closed up 0.4 per Malone cent to 73.75 pence in London before the deal was announced. (Bloomberg)

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