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Categorized | Capital Markets, Equities

Ziggo set for IPO as sentiment improves

Posted on February 29, 2012

Dutch cable operator Ziggo is to launch an initial public offering on Amsterdam’s Euronext NYSE exchange, in a sign that improving equity markets and reduced anxiety over the eurozone debt crisis are giving owners the confidence to take companies public again.

The size of the potential offering is estimated at up to €800m, which would make it Europe’s largest IPO since Glencore raised $10bn last May, a rare glimmer of hope for the continent’s battered equity capital markets.

In 2011 the global volume of IPOs fell 40 per cent to $177bn, according to Dealogic, as worries of sovereign defaults in the eurozone and a hard landing in China kept markets jumpy. The build-up of frustrated groups eager to go public includes Facebook, Sinochem, Manchester United, Graff Diamonds and Japan Airlines.

Last year saw a record $76bn worth of cancelled new listings, many of them European groups. Société Générale predicted European IPOs would fall more than a quarter this year, to an anaemic €20bn. But the Ziggo listing offers hope that the market’s turnround since December may be breathing life back into the IPO market.

Ziggo is the largest cable operator in the Netherlands, with 56 per cent of household cable connections and revenues of €1.48bn in 2011. It was created after private equity firms Warburg Pincus and Cinven bought up three smaller cable operators in 2006 and fused them.

A person familiar with the owners’ thinking said that market volatility in 2011 had frustrated the desire of Warburg Pincus and Cinven to cash in on their investment, and that recent improvements in confidence had played a role in the decision to go ahead now.

Ziggo chief executive Bernard Dijkhuizen told the that the company had “tremendous growth momentum and large cash flow generation. The logical next step is an IPO.”

Analysts say that the company’s growth prospects are strong. Cable groups have been outcompeting telcos in the Netherlands for the most valuable customers, those ordering “triple play” service of phone, TV and broadband internet.

Mr Dijkhuizen said Ziggo would pay a dividend totalling €220m in 2012, and would adopt a progressive dividend policy of paying at least 50 per cent of free cash flow from 2013 on.

Ziggo had earnings before interest, taxes, depreciation and amortisation of €835m in 2011. Peers such as Telenet and Kabel Deutschland trade at multiples of roughly 9 times ebitda, which would suggest the company’s enterprise value could be some €7.5bn.

Ziggo still carries €3.23bn in net debt, leaving an equity value for the company of well over €4bn. 

It has not announced a timetable for the IPO.