Com Hem delivers Healthy return

Carlyle Group and Providence Equity Partners have jointly acquired Swedish cable TV operator Com Hem in a secondary buyout from EQT. EQT acquired the company in June 2004 for €236m and is reported to have sold it for around €1bn. Based on a one-third debt to equity ratio, the Swedish investor will have made at least 5x its money on the exit.

Carlyle does have some previous form in the Nordic cable sector, having previously invested in Bredbadsbolaget (B2) alongside Investor and Access Industries. That company was sold to Telenor for US$822.5m in 2004. It has also worked with its current partner on the acquisition of Dutch cable company Casema.

In addition to Casema, Providence’s European investments include Kabel Deutschland and Grupo Corporativo ONO, Spain’s second largest broadband provider, which Providence invested in through ONO’s acquisition of Auna TLC. Providence was also part of the consortium that completed the record buyout of Danish telco TDC (see below).

In both the B2 and Com Hem cases, there had been initial IPO speculation. In both cases, however, strong demand emerged from private equity and trade bidders. The vendors of B2 had considered an IPO, but Telenor fought off trade and private equity interest, including Apax and Advent, by paying a reported 12x expected 2005 earnings.

Com Hem is a cable TV operator in Sweden. It provides television to more than 1.4m households in Sweden, including 205,000 digital TV subscribers, and offers broadband internet and telephony to 195,000 and 62,000 customers, respectively. The company has a unique triple-play service branded Com Bo, which combines television, broadband and telephone services at competitive rates. Com Hem is headquartered in Stockholm and employs 630 people.

Jorg Mohaupt, a director at Providence Equity Partners, said: “We believe Com Hem is one of the best cable assets in Europe. With 36% of the household television market, 60% of the household cable market and an exceptional service offering, the company has a strong competitive position and significant opportunities for further growth. We look forward to working with Carlyle and Gunnar Asp and his team to further develop Com Hem and enhance value at the company.”

In a rapidly consolidating sector in which the pace of deals in 2005 has been frantic, NTL, the UK-based cable company that is itself in the process of merging with rival Telewest, has outlined plans for a proposed takeover of Richard Branson’s Virgin. Under the proposals, which have been negotiated over the past nine months, NTL will offer Virgin Mobile shareholders (of which Sir Richard Branson’s Virgin Group is the largest, with 72%) 0.09298 shares of NTL common stock per share of Virgin Mobile, as well as a full cash alternative of 323p per share.