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Liberty Global-Ziggo Deal under EU Scrutiny

Zacks Equity Research

Yesterday, the anti-trust regulatory body, European Union Competition Commission, stated that it is evaluating the proposed merger deal between Liberty Global plc (LBTYA) and Ziggo N.V.  In Jan 2014, Liberty Global had reached an agreement to acquire a 100% stake in Ziggo N.V., the largest cable MSO (multi service operator) in the Netherlands.

The EU regulator had earlier rejected Dutch regulatory authority’s plea to take over the case despite their claims of understanding the domestic market better. The EU regulatory body also remains concerned over the impact the deal will have on the Flemish-speaking areas of neighboring Belgium.

At present, Liberty Global holds a 28.5% stake in Ziggo. Notably, Liberty Global will pay approximately $13.6 billion to acquire the remaining 71.5% stake in Ziggo including its outstanding debt. The deal will be completed through a stock and cash transaction. Per the deal, each Ziggo shareholder will receive €11.00 in cash, 0.2282 Liberty Global Class A ordinary shares and 0.5630 Liberty Global Class C ordinary shares.

Liberty Global already boasts a strong presence in the Dutch cable-TV market as its UPC Broadband Holding BV unit is the second largest cable MSO in the nation. A merger between Liberty Global and Ziggo will create a dominant cable TV operator in the Netherlands with approximately 10.8 million revenue generating units. Ziggo also competes with telecom operators such as Royal KPN N.V. and Vodafone Group plc (VOD).

Liberty Global is striving to extensively penetrate the European region with its bundled video, voice and Internet (data) services. The European markets are still relatively untapped for this unique triple-play offering.

The company has also joined the RDK Management LLC, a joint venture between U.S. cable giants Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC). In 2013, Liberty Global acquired the license to test RDK standard in its next-generation Horizon IP video gateways. Liberty Global currently carries a Zacks Rank #4 (Sell).

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