Tele Columbus lock up expiry to spark M&A?
08 July 2015 London
Image: Shutterstock
Dealreporter’s Adnan Siddique, CFA, discusses the latest European pre-event ideas: German cable provider Tele Columbus, UK real estate company Grainger and Air-France KLM
A six-month lock-up expires 23 July on shares representing 10% of the outstanding capital in German cable provider Tele Columbus. Tele Columbus is particularly intriguing because it operates in a sector undergoing consolidation and is frequently at the centre of takeover speculation. Any Tele Columbus stock offered to the market could be an opportunity for a potential acquirer looking to build a stake.
Tele Columbus is the third largest (View) cable provider in Germany in terms of subscriber numbers. It underwent a restructuring (View) in 2011 and another in 2013. In 2014 it was spun off from its parent company, and was listed in Frankfurt in January 2015.
In the meantime it was the target of Kabel Deutschland (KD8) pre-spin-off in 2012. The deal was blocked February 2013 by the German Federal Cartel Office on antitrust grounds. Prospects of a deal were revived again in March 2015 after KD8’s head of external communications commented that following the merger of Vodafone and KD8, the combined group may target Tele Columbus.
Given that the landscape of the cable market has moved towards quad play in recent years, it is possible that the regulator may take a different view than in 2013. But, in the last month, Vodafone has entered into asset swap talks with Liberty Global. One element of these intricate negotiations is whether Vodafone could exit Germany. If this happens it would likely negate the need for a deal with Columbus. But this is only one dimension of the talks. There are other possible outcomes, which may still leave Vodafone interested in Columbus.
Additionally, Primacom, a company that rejected a merger with Tele Columbus in November 2013, is thought to be reassessing a potential deal according to Dealreporter intelligence.
There is a large bloc of Tele Columbus shareholders who were originally distressed lenders and received warrants amid restructurings. The warrants were converted following the January IPO. Many of these shareholders could be willing to sell in the event of a takeover. A total of 32% (View) of its share capital remains under the control of originally distressed lenders; York Capital (20.86%), Davidson Kempner (7.3%) and Capula (3.8%).
Activist confrontation with Grainger
It looks like UK activist investor Crystal Amber may have a fight on its hands after taking a 3.08% position in specialist residential landlord Grainger Plc.
Crystal Amber’s position became public in a Sunday Times story (View) (28 June), which included a quote from Crystal Amber CEO Richard Bernstein. Grainger disclosed (View) to the market that Amber had taken the position on Monday (29 June) after Amber notified Grainger “late” on 26 June. Grainger also has announced a new CEO this morning.
The article itself mentions a source linked to Grainger stating its opposition to Amber’s plan to realise value by pushing the company to sell undervalued regulated tenancies.
Amber’s decision to speak to the press differs to its approach at another property-related undervaluation play at Pinewood Group. Amber disclosed a 4.04% holding on 17 April, but has refused to elaborate on its plan publicly. Pinewood published its FY14/15 annual results on 30 June and Amber is reported (View) to be meeting Pinewood management in the coming weeks.
Dealreporter can’t be sure, but we hazard a guess that the move to go public is likely to have been a strategic calculation by Amber. This would allow Amber to force a debate if Grainger was unwilling to enter into dialogue or if an impasse had been reached in discussions. Additionally, it puts pressure on incoming CEO, (View) Helen Gordon, due to start January 2016, who may be more conducive to Amber’s proposal. There are murmurings in the Sunday Times article that Crystal Amber’s plan B is to orchestrate a takeover of Grainger. By making the campaign public, it signals to would-be suitors that a crucial shareholder in Grainger is supportive of a take-out.
The publicity could also draw in other shareholders to take a stance; the most influential being 20.4% shareholder (View) Schroders. Dealreporter notes that Schroders did not back activist Worldview’s attack on Exillon Energy in 2013, nor did it support Lonestar’s 2014 campaign (View) against Antares Energy in Australia.
Air-France denies job cuts, but has Amadeus cash box
Air-France KLM reportedly denied (View) a Le Monde article (View) that it will cut 3,000 ground staff and 300 pilots. However, the beleaguered French carrier posted three profit warnings last year and has a trailing leverage ratio of 3.9x and could need more capital.
Despite the denial, the news still seems negative for Air France, particularly on the back of the April air traffic controllers strike. Other headwinds include Alitalia’s decision to terminate (View) its European JV with Air-France, opting instead to develop its relationship with Etihad. This could complicate the Atlantic JV between the French airline, Delta Air Lines and Alitalia. The Atlantic JV generated revenues of USD 3bn in 2013.
If Air-France was to look to raise capital, it still owns 9.9m shares in Amadeus, worth around EUR 350m based on market prices. Back in November 2014, Air-France announced those shares were hedged (View) in a derivative transaction with Deutsche Bank, but then, as now, it has refused to disclose the expiry date of the hedge to Dealreporter. Since then, Amadeus shares have increased 18%. However, Air-France would not benefit from this if the hedge is still in place.
There are also headwinds for Amadeus that may make it better for Air France to sell the stock sooner rather than later. Amadeus could face more air lines following Lufthansa’s example, after the German carrier decided to impose a levy on tickets bought via external bookings, effectively reducing Amadeus’ competitiveness. If Air-France does want to sell the shares but finds its hands tied by the hedge, it can always enter into an opposite transaction to effectively cancel the hedge.
The above is an extract from Dealreporter’s Europe Flash, which is published twice weekly on Dealreporter. The Europe Flash combines proprietary insights and commentary with raw data from stock exchange flings, transcripts, analyst reports and news stories, producing short and long-term actionable pre-event ideas.
A six-month lock-up expires 23 July on shares representing 10% of the outstanding capital in German cable provider Tele Columbus. Tele Columbus is particularly intriguing because it operates in a sector undergoing consolidation and is frequently at the centre of takeover speculation. Any Tele Columbus stock offered to the market could be an opportunity for a potential acquirer looking to build a stake.
Tele Columbus is the third largest (View) cable provider in Germany in terms of subscriber numbers. It underwent a restructuring (View) in 2011 and another in 2013. In 2014 it was spun off from its parent company, and was listed in Frankfurt in January 2015.
In the meantime it was the target of Kabel Deutschland (KD8) pre-spin-off in 2012. The deal was blocked February 2013 by the German Federal Cartel Office on antitrust grounds. Prospects of a deal were revived again in March 2015 after KD8’s head of external communications commented that following the merger of Vodafone and KD8, the combined group may target Tele Columbus.
Given that the landscape of the cable market has moved towards quad play in recent years, it is possible that the regulator may take a different view than in 2013. But, in the last month, Vodafone has entered into asset swap talks with Liberty Global. One element of these intricate negotiations is whether Vodafone could exit Germany. If this happens it would likely negate the need for a deal with Columbus. But this is only one dimension of the talks. There are other possible outcomes, which may still leave Vodafone interested in Columbus.
Additionally, Primacom, a company that rejected a merger with Tele Columbus in November 2013, is thought to be reassessing a potential deal according to Dealreporter intelligence.
There is a large bloc of Tele Columbus shareholders who were originally distressed lenders and received warrants amid restructurings. The warrants were converted following the January IPO. Many of these shareholders could be willing to sell in the event of a takeover. A total of 32% (View) of its share capital remains under the control of originally distressed lenders; York Capital (20.86%), Davidson Kempner (7.3%) and Capula (3.8%).
Activist confrontation with Grainger
It looks like UK activist investor Crystal Amber may have a fight on its hands after taking a 3.08% position in specialist residential landlord Grainger Plc.
Crystal Amber’s position became public in a Sunday Times story (View) (28 June), which included a quote from Crystal Amber CEO Richard Bernstein. Grainger disclosed (View) to the market that Amber had taken the position on Monday (29 June) after Amber notified Grainger “late” on 26 June. Grainger also has announced a new CEO this morning.
The article itself mentions a source linked to Grainger stating its opposition to Amber’s plan to realise value by pushing the company to sell undervalued regulated tenancies.
Amber’s decision to speak to the press differs to its approach at another property-related undervaluation play at Pinewood Group. Amber disclosed a 4.04% holding on 17 April, but has refused to elaborate on its plan publicly. Pinewood published its FY14/15 annual results on 30 June and Amber is reported (View) to be meeting Pinewood management in the coming weeks.
Dealreporter can’t be sure, but we hazard a guess that the move to go public is likely to have been a strategic calculation by Amber. This would allow Amber to force a debate if Grainger was unwilling to enter into dialogue or if an impasse had been reached in discussions. Additionally, it puts pressure on incoming CEO, (View) Helen Gordon, due to start January 2016, who may be more conducive to Amber’s proposal. There are murmurings in the Sunday Times article that Crystal Amber’s plan B is to orchestrate a takeover of Grainger. By making the campaign public, it signals to would-be suitors that a crucial shareholder in Grainger is supportive of a take-out.
The publicity could also draw in other shareholders to take a stance; the most influential being 20.4% shareholder (View) Schroders. Dealreporter notes that Schroders did not back activist Worldview’s attack on Exillon Energy in 2013, nor did it support Lonestar’s 2014 campaign (View) against Antares Energy in Australia.
Air-France denies job cuts, but has Amadeus cash box
Air-France KLM reportedly denied (View) a Le Monde article (View) that it will cut 3,000 ground staff and 300 pilots. However, the beleaguered French carrier posted three profit warnings last year and has a trailing leverage ratio of 3.9x and could need more capital.
Despite the denial, the news still seems negative for Air France, particularly on the back of the April air traffic controllers strike. Other headwinds include Alitalia’s decision to terminate (View) its European JV with Air-France, opting instead to develop its relationship with Etihad. This could complicate the Atlantic JV between the French airline, Delta Air Lines and Alitalia. The Atlantic JV generated revenues of USD 3bn in 2013.
If Air-France was to look to raise capital, it still owns 9.9m shares in Amadeus, worth around EUR 350m based on market prices. Back in November 2014, Air-France announced those shares were hedged (View) in a derivative transaction with Deutsche Bank, but then, as now, it has refused to disclose the expiry date of the hedge to Dealreporter. Since then, Amadeus shares have increased 18%. However, Air-France would not benefit from this if the hedge is still in place.
There are also headwinds for Amadeus that may make it better for Air France to sell the stock sooner rather than later. Amadeus could face more air lines following Lufthansa’s example, after the German carrier decided to impose a levy on tickets bought via external bookings, effectively reducing Amadeus’ competitiveness. If Air-France does want to sell the shares but finds its hands tied by the hedge, it can always enter into an opposite transaction to effectively cancel the hedge.
The above is an extract from Dealreporter’s Europe Flash, which is published twice weekly on Dealreporter. The Europe Flash combines proprietary insights and commentary with raw data from stock exchange flings, transcripts, analyst reports and news stories, producing short and long-term actionable pre-event ideas.
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