Permira, KKR team up for SBS

Two private equity firms have agreed to pay €2.09bn (US$2.55bn) for SBS Broadcasting, a European broadcasting company minority owned by US media company Liberty Global.

UK-based buyout firm Permira and its US peer Kohlberg Kravis Roberts are to pay SBS €1.691bn in cash for substantially all of its assets and to assume substantially all of its liabilities to give a total transaction value of €1.9bn and an enterprise valuation of €2.1bn.

Deutsche Bank is acting as financial adviser to the special committee of SBS, and Sullivan & Cromwell and Arendt & Medernach are acting as the committee’s legal advisers. Lehman Brothers is acting as financial adviser to Permira and KKR, and Freshfields Bruckhaus Deringer and Simpson Thacher & Bartlett are acting as their legal advisers.

Barclays Capital, Lehman Brothers and Royal Bank of Scotland will provide debt financing for the transaction.

SBS’s Nasdaq and Euronext-listed shareholders and option holders are expected to receive about €46 per fully diluted share. SBS stock closed at a five-year high of US$49.1 on August 19, but a €46 per share distribution would represent a premium of 15.9% to the share price on August 12, the last trading day before sale rumours surfaced, and of 37.8% to the share price six months prior to that date.

“This transaction caps a tremendous period of growth and value creation for SBS. Since its founding 15 years ago and its listing in 1993, SBS has grown dramatically from three start-up Scandinavian television stations into one of Europe’s largest broadcasting companies, reaching over 100m people across nine countries,” said Harry Evans Sloan, executive chairman and founder of SBS.

SBS owns and operates Dutch weekly TV and radio guide Veronica Magazine, the largest weekly publication in the Netherlands, with a circulation of about 1.1m.

In its interim results for the six months to June 30, SBS posted adjusted Ebitda up 33% to €55.7m on sales of €243.6m, up 30% from the previous year. Earlier this year it spent €269.6m on Nordic pay-TV provider C More Group.

SBS shareholders representing a minimum of 21.9% of the total outstanding common shares of the company, including the largest shareholder, Liberty Global, and all directors and certain officers of the company, have entered into agreements to vote in favour of the transaction.

John Malone, chairman and new chief executive of Liberty Global, built a 20% stake in SBS in 2000 through UnitedGlobalCom, the cable TV division of his Liberty Media business.

Liberty, which owns the QVC shopping channel and Starz TV unit, has been rationalising its structure and paying down its debt after becoming overstretched in the TMT bubble years. In Liberty’s earnings call, Robert Bennett, the retiring president, said it bought back US$1bn of debt in the second quarter to complete its restructuring, but is looking at acquisitions for its core operations.

Under the acquisition agreement, SBS is required to pay Permira and KKR liquidated damages of €50m if it is acquired by another purchaser before a predetermined deadline.