Wednesday, August 12, 2020

Liberty Global offer for Sunrise

Offer

  • Sunrise board & shareholder Freenet (24%) support
  • 110 CHF/share cash (premium 28% to 200811, 32% over last 60 days average)
  • Tender to start end Aug 2020 for 40 business days
  • Unconditional on reaching two-thirds, to squeeze out minorities & delist, expects approval end 2020
  • To be financed from cash (CHF 3.5b) & new debt (CHF 3.2b o/w 1.6b for refinancing Sunrise debt)
  • Break-up fee CHF 50m for Sunrise

Valuation

  • Equity CHF 5.0b, EV CHF 6.8b
  • 7.5x adj EBITDA or 10.3x adj OpFCF after synergies
  • 10.0x adj EBITDA or 17.6x adj OpFCF before synergies

Synergies

  • NPV after costs CHF 3.1b (o/w CHF 2.6b from low-risk cost & capex)
  • Annual run rate from rev, costs, capex CHF 275m (46m from rev, 187m from opex, 42m from capex)

Pro forma combination

  • >3500 employees
  • Rev CHF 3.1b
  • 2.1m postpaid subs, 1.2m BB subs, 1.3m TV subs, market share in each ~30%
  • Target gigabit BB coverage 90% of HH by 2021 (UPC 75%, Sunrise 30%)
  • To upgrade to 10 Gb/s over time
  • UPC/Sunrise to become part of UPC credit pool, target leverage 5.0x
  • May consider IPO of the merged business in the future

Quotes

  • "attractive opportunity to deploy existing cash to unlock substantial synergies and sustainable free cash flow growth."
  • “This transaction is another significant step on our path to create fixed-mobile champions in all of our core markets"
  • " ... after this deal, and assuming completion of our recently announced UK transaction, we will continue to have approximately $7 billion of liquidity to drive value-creation for shareholders."


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