John C. Malone’s latest swoop in the cable sector is true to form.
The cable tycoon’s Liberty Global was sitting on a paper profit of over 40 million euros hours after buying a 12.7 pct stake in Dutch cable company Ziggo from Barclays on March 28. Malone has shrewdly exploited a forced seller, after Barclays was lumbered with the millions of Ziggo shares it failed to sell for the company’s private-equity owners days earlier. What’s more, he has plenty of experience in using blocking stakes as a takeover strategy.
Barclays has suffered unwelcome publicity from the episode but it will still be pleased with the outcome. The bank’s bungled share sale was a reminder of how risky it is to sell big blocks of stock for clients and commit to achieving a set price. Not that a reminder was needed. Placings in German satellite operator ProSieben, Spanish travel software group Amadeus and French voucher company Edenred all left banks saddled with unwanted stakes.
Barclays’ Ziggo stake dwarfed these: it was equivalent to about 1.5 percent of the bank’s Basel III core capital. The sale to Mr. Malone should shake regulators off its back.
Furthermore, the 25 euros a share paid - financed by existing Liberty funds and a loan from another bank - is only a 5 euro cent discount to what the British bank paid for the block on March 18. Factor in fees and a hedge and Barclays may have even made money.
Ziggo shareholders should have mixed feelings. Mr. Malone’s stake is a deterrent to a bid for the company, and could thereby deprive them of a tasty takeover premium. True, he was the natural bidder anyway. But it’s not clear that even a low-ball takeover offer from him could come any time soon. Liberty has yet to digest its $20 billion takeover of Britain’s Virgin Media.
Further out, Mr. Malone is in pole position to snap up the remaining 17.1 percent combined stake held by buyout shops Warburg Pincus and Cinven. There may be valuable synergies from mashing Ziggo into UPC, another Dutch cable company he owns. But if he fails, he will still wield influence. The chief executive of Belgium’s Telenet - in which Mr. Malone also took a big stake - resisted Liberty’s overtures. Not long afterward, he was replaced - with a former Liberty group executive.
Dominic Elliott is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
