as·si·du·i·ty

On 28-Jan-03 Dutchtone Group N.V. (86% owned by France Telecom S.A.) transferred all of the shares in the capital of Dutch cable TV operator N.V. Casema (‘Casema’) to a consortium of Carlyle Group (46%), Providence Equity Partners (46%) and GMT Communications Partners (8%) in exchange for the repayment and termination of a €665m credit facility provided by France Telecom.  France Telecom was obliged to inject €131.4m in equity into Casema in order to clear all external debt prior to the sale (€163.3m). This resulted in net cash proceeds to France Telecom of approximately €502m.

The €665m total consideration implied the following multiples for 2002: 283% of turnover (€235m, 0.37x net tangible capital turn), 7.5x EBITDA (€88m, 37.5% margin), 1.0x net tangible capital employed (€634m at 31-Dec-02). Casema lost €16m before interest tax and amortization of goodwill in 2002.

The transaction was financed with €363m in equity, and a €475m credit facility (5.4x EBITDA,  of which €335m was taken up at 28-Jan-03: 3.8x EBITDA) consisting of €425m in senior secured term loans and a €50m revolver. The credit facility had an estimated 59% debt-to-value ratio. The transaction valued each of the 1.367,000 subscribers at €486.

This deal was concluded after an agreement in Aug-02 to sell Casema to Liberty Media Corporation (‘Liberty’) for €750m expired when it became clear that it would be blocked by Dutch regulators in Nov-02. This deal was a long shot as Liberty already controlled 40% of the Dutch cable TV market through its ownership of a controlling stake of 53.1% (66.5% after restructuring) in the capital of United Pan-Europe Communications N.V. (‘UPC’). Adding Casema’s 20% market share would result in Liberty controlling approximately 60% of cable TV connections in The Netherlands and close to 100% of cable TV connections in its key western provinces (the densely populated Randstad region).