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UPDATE 3-Liberty Global in talks to buy cable firm Ziggo

Robert-Jan Bartunek
Thursday, 12 Dec 2013 | 10:36 AM ET

* Liberty makes another attempt to buy Ziggo

* Analysts value deal at around 5 billion euros

* Ziggo rejected previous approach as too low in Oct

* Ziggo shares hit all-time high

BRUSSELS, Dec 12 (Reuters) - U.S. cable group Liberty Global is in takeover talks with Dutch operator Ziggo , its latest move to consolidate the sector in Europe with a deal analysts say could cost around 5 billion euros ($6.9 billion).

Ziggo, which rejected an approach from the company controlled by U.S. tycoon John Malone in October as too low, on Thursday said no decision has yet been made about a full takeover offer.

Liberty, which makes more than 90 percent of its revenue in Europe, has been driving consolidation of the fragmented market there seeking to profit from rising and largely recession-proof demand for faster Internet and digital television.

The U.S. company has built its leading position in a broad stretch of Europe from Ireland to Romania via acquisitions over the past decade, and already owns 28.5 percent of Ziggo.

Buying the rest would increase Liberty's presence in the Low Countries, where it owns Ziggo's Dutch competitor UPC, as well as a majority stake in Belgian group Telenet, the main cable group in the north of Belgium.

Liberty, which also owns Germany's second-largest cable operator UnityMedia and bought Britain's Virgin Media in a $15.8 billion deal in February, declined to comment on Thursday.

Its finance chief said last month the company saw few remaining opportunities for another big deal in Europe and while it was still interested in taking over Ziggo it would only do so at the right price.

Ziggo's shares, which were listed in March 2012 when private equity groups Warburg Pincus and Cinven took the group to the Amsterdam bourse, have benefited from the takeover speculation, rising 10 percent to an all-time high of 33.98 euros on Thursday. It pared gains to trade 5.9 percent higher at 1459 GMT.

STRONG APPETITE

ABN AMRO analyst Marc Hesselink said Liberty could bid as much as 37 euros per share, based on a value of 32 euros for Ziggo and 5 euros of cost gains from combining the networks of Ziggo and UPC.

That would value Ziggo, which from January will be headed by former Deutsche Telekom boss Rene Obermann, at 7.4 billion euros, and the share Liberty does not already own at 5.3 billion euros.

Analysts at Bernstein said Liberty could bid up to 35 euros, implying the cost to Liberty of 5 billion euros.

Ziggo did not say in October how much Liberty had offered to pay then.

Shares in European cable companies trade on about nine times enterprise value to forecast EBITDA, according to Thomson Reuters data, which compares with about five times for telecom operators.

At 10.2 times, Ziggo's multiple is below the 11.9 times value for Kabel Deutschland, which is now majority-owned by Vodafone. Liberty paid about eight times forward EBITDA for Virgin Media.

At a price of 35 euros per Ziggo share, the multiple would be about 11 times.

Investors have shown a strong appetite for European cable companies because of their promise of superior growth and merger prospects. Cable firms have attracted the interest of mobile companies like Vodafone, as all-inclusive bundles of television, Internet, mobile and fixed-line telephone services gain in popularity with consumers.

The share price for France's Numericable has risen by about 11 percent since its market debut a month ago.

While Liberty has been a consolidator in Europe, it also has a reputation for resisting pressure to pay what it considers to be too much for its targets.

In January it halted a bid to take full control of Telenet after increasing its stake to 58.3 percent from 50.4 percent, refusing to pay more even though an independent advisor and large shareholder had said the offer was too low.

It also walked away from Kabel Deutschland, when Vodafone boosted its bid to 7.7 billion euros ($10.62 billion) for full ownership.

UBS analyst Polo Tang wrote in a note to clients that Liberty might be content with a majority stake below 100 percent, with a Ziggo-UPC combination still listed.

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