Jesus Rodriguez Aguilar

European Event-driven Analyst

Event-Driven

On 21 December, Morgan Stanley Infrastructure Inc. offered to acquire <a href="https://www.smartkarma.com/entities/tele-columbus-ag" target="_blank" data-smartkarma-citation="entities:21727:1" rel="noopener">Tele Columbus Ag (TC1 GR)</a> from <a href="https://www.smartkarma.com/entities/united-internet-ag" target="_blank" data-smartkarma-citation="entities:21735:1" rel="noopener">United Internet Ag (UTDI GR)</a> United Internet Investments Holding AG &amp; Co. KG, <a href="https://www.smartkarma.com/entities/rocket-internet-se" target="_blank" data-smartkarma-citation="entities:20226:1" rel="noopener">Rocket Internet Se (RKET GR)</a>, Union Investment Privatfonds GmbH, 3d investors, and others for approximately €380 mn.
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The deal will also strengthen the balance sheet of Tele Columbus.
<ul>
<li>Morgan Stanley is also backing a €475 million rights issue, and will make available a further €75 million in equity after completion to back the firm's fiber strategy.</li>
<li>Tele Columbus said the deal would significantly reduce its net debt, and thereby bring a “better risk assessment” for the remaining bonds and loans.</li>
<li>If the takeover offer is successful, United Internet will contribute its stake in Tele Columbus of around 29.9%. In return, United Internet will receive a minority shareholding in Kublai GmbH.</li>
</ul>
The offered consideration is €3.25 per share in cash.
<ul>
<li>For an implied equity value of €380.58 mn, and an implied EV of 1,925.28 mn (€1,544 mn net debt assumed).</li>
<li>The offer represents 4.1x EV/Fwd Revenue vs. 3.9x for the median of comparable companies and 8.5x EV/Fwd EBITDA vs. 7x for the median of comparable companies.</li>
<li>On this basis, the offer price seems fair. There's business plan execution risk, further down the road.</li>
</ul>
With commitments equivalent to 43.26% from the main shareholders, the offer looks almost certain to succeed.
<ul>
<li>Tele Columbus closed on 22 December at €3.22, a gross spread of 1%, equivalent to 2%-3% annual, depending on the closing.</li>
<li>Although not terribly exciting, it looks a fairly safe trade. Some patience may be needed to build a position.</li>
</ul>
Recommendation is LONG Tele Columbus.
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Germany

Tele Columbus AG provides cable services. The Company offers cable television programming, telephone, and internet connection services to homeowners and the housing industry. Tele Columbus operates throughout Germany.

Tele Columbus AG - TC1 GR

Description