Warburg, Cinven Snap Up Casema for US$2.6 bil.    

The prospect of consolidation in the Dutch cable industry moved a step closer today as private-equity companies finalised plans to merge the country’s third–largest cable operator, Casema, with Multikable.  Less than four years after buying Casema from France Telecom, Providence Equity Partners and the Carlyle group have sold the firm to Warburg Pincus and Cinven for 2.1 billion euro (US$2.6 billion). The sum represents more than three times what Cinven was worth in 2003 (665 million euro). Warburg - which bought another Dutch cable operator, Multikable, in 2005 for 515 million - plans to merge Casema and Multikable in order to strengthen Casema's position as the third-largest Dutch cable operator.

"The Dutch cable market is one of the most attractive cable TV markets in Europe”, Warburg managing director Joseph Schull said in a telephone interview. "The cable sector's share of the total pay TV market is among the highest in Europe, and pay TV penetration of total TV households is also among the highest in Europe.'

Outlook and Implications

• Casema Grows Stronger, KPN Readies for a Fight: The eventual merger will create a player with more than 1.6 million customers, strengthening its position as the third-largest player in the market (the leaders are Liberty Global's UPC Nederland, on 2.24 million subscribers, and Essent Kablecom, on 1.74 million). For the 2005 financial year, Casema and Multikable combined had revenues of about 416 million euro, and would control about 16% of the country's broadband internet access connections."Both are quality businesses that, in combination, will provide highly competitive and compelling triple-play products to the Dutch market,' David Barker, a partner at U.K.-based Cinven, said. Meanwhile, KPN has reiterated its objection to further consolidation in the market, accusing the government of operating a two-tier regulatory system that makes it easy for the cable operators to poach its customers but hinders its efforts at fighting back. However, the company's intention to challenge the planned merger of Casema and Multikable on anti-trust grounds would struggle to garner substantial support (see Netherlands:17 July 2006: KPN Opposes Consolidation in Cable Industry, 29 June 2006: KPN Sues Government over Telecoms Rules and 15 June 2006: Consolidation Brewing in Dutch Cable Industry).
  
  
• Private-Equity Groups Rule: Private-equity players are taking an increasingly large role in merger and acquisition (M&A) deals in Europe. Both Warbug and Cinven have raised billions to fund acquisition sprees (see Europe: 30 June 2006: Consolidation in Europe's Telecoms Industry and February 2006: European Telecoms Mergers and Acquisitions). Warburg raised US$8 billion last year, while Cinven managed a 6.5 billion-euro buyout fund in June 2006. Apart from the takeover of O2 by Telefónica, the biggest M&A deals in Europe in the past 12 months have been championed by private-equity groups. Nordic Telephone Company (NTC), an investment vehicle for several private-equity groups, acquired Danish incumbent TDC late last year. Australian investment fund Babcock & Brown (B&B) partnered with eircom's employee trust in April to take over the Irish incumbent. Meanwhile, during the same month, U.S. private-equity group Blackstone paid 2.68 million euro to take a 4.5% stake in Europe's largest telecoms group (by revenue), Deutsche Telekom. Since then, speculation has been rife that Blackstone could equally make a bid for the entire company. Other giant European players, such as Vodafone and BT, have also been linked to a swoop by private-equity players (seeIreland: 23 May 2006: eircom Accepts US$3.1 bil. Takeover Offer, Germany: 24 April 2006: Blackstone Buys 4.5% Stake in Deutsche Telekom for US$3.32 bil. and Denmark: 6 October 2005: Private Equity Firms Hover Over TDC).