Cable operator Ziggo has confirmed it will seek a stock listing on the Amsterdam exchange. Shareholders Warburg Pincus and Cinven will sell existing shares in Ziggo NV in the initial public offering. At the same time, shareholder loans worth EUR 2.281 billion will be converted to shares. Details on the timing, price and size of the offering will follow later. Reuters reports that the company will sell around 15-20 percent of its shares, raising EUR 600-800 million.
Ziggo is profiting from the good conditions on US stock markets and share price gains among cable operators since last autumn. The rumours of IPO preparations have been in full swing for at least a year and a half. Apparently its repeated 'threats' to go public did not prompt any rivals to launch a takeover bid.
The IPO will be for another new entity, Ziggo NV, which follows the other companies Ziggo Bond Company, Ziggo Holding, Zesko, etc. The balance sheet will be affected by the conversion of shareholder loans to equity, although these were not on the balance sheet of Ziggo Bond Company BV, the company which has been reporting the group's quarterly results since early 2010. To further sow confusion, the customer figures and financial results presented with the IPO announcement are different from those released earlier, as they concern a different corporate entity. Ziggo has also adopted a flattering accounting method for the number of revenue-generating units, which distorts the comparison with Liberty Global, owner of the other major Dutch cable operator, UPC. (Ziggo includes the number of premium TV subscribers as a separate category in RGUs, alongside basic TV, broadband and telephony).
The company also drew attention to its dividend policy. Ziggo is targeting a relatively high net debt-to-EBITDA ratio of 3.5, although that is somewhat lower than the recently reported 3.87. It aims to pay out 50 percent of the 'free cash flow to equity’ (free cash flow minus debt repayments) as dividends. The company wants to profile itself as a dividend stock and give out the message to investors: we have the free cash flow, and as such the required capex, under control. The latter is a sensitive issue, as there has been speculation about the quality of Ziggo's network. For the moment, nothing (capex, EBITDA margin) suggests that network costs are getting out of control, although we have found that capex among European cable operators, including Ziggo, is rising (see our Research Brief 'Ziggo IPO preview update – valuation est. EUR 8 bln').
Reuters reports that Ziggo will give more details around 14 March, which should provide more clarity on the company's exact results and balance sheet and the price range for the IPO. We will then provide new estimates for the enterprise value and equity value, previously set at respectively EUR 8 billion and EUR 4.8 billion for the reporting entity, following a comparison with other listed peers.
