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Liberty's Ziggo Bid Review to Remain With EC

Stocks in this article: LBTYA

NEW YORK (The Deal) -- The European Commission on Wednesday said it would review the proposed acquisition of Ziggo by Liberty Global (LBTYA), denying a request from Dutch authorities to take over the review of a deal which values the Dutch cable company at 10 billion euros ($13.6 billion) including debt.

The Commission in May opened an in-depth review of the case, saying it was concerned Liberty would gain a near-monopoly in the Netherlands by combining the country's two major pay-TV providers.

"The Commission concluded that the Dutch competition authority was not better placed to examine the transaction because of the EC's experience in assessing many mergers in the converging media and telecommunications sectors, the presence of Liberty Global in 12 countries of the European Economic Area (EEA), and the need for a consistent application of the merger control rules," the EC said.

The EC Wednesday said it was also concerned about the impact of the deal on competition in the Flemish-speaking parts of neighboring Belgium.

Liberty, the international wing of cable financier John Malone's Englewood, Colo.-based empire, would have about 90% of the Dutch cable market should the deal proceed. Regulators are especially concerned as the line between cable providers, phone companies and sometimes even broadcasters blurs -- all now strive to provide a mix of content as well as fixed-line, wireless and Internet services.

However, many companies now argue that the blurring lines themselves mean the market should now be broadened to include all three industries rather than focusing on a single industry such as cable.

It's not the first time the EC has rejected a national company's request to review a deal. It also rejected a German request to rule on Swiss building materials maker Holcim Ltd.'s purchase of Cemex SAB de CV's German unit.

German regulators had also hoped to review Telefonica SA's 8.6 billion euro agreed takeover of Royal KPN NV's E-Plus German mobile phone unit but the EC refused and will reportedly approve the deal -- with stiff concessions -- later this week.

To prepare for that approval the Spanish telecom on Wednesday announced an agreement to rent 20% of the capacity on its enlarged German cellular network to Drillisch AG, a German cellular reseller.

Telefonica has offered to open up large swaths of its network to resellers -- phone companies that don't operate their own networks -- in order to maintain retail price competition and win approval. Its purchase of E-Plus would shrink Germany's cellular landscape to three providers from four -- something regulators have resisted in the past as they see four as the magic number for competition.

Liberty in January announced an agreement to buy the 71.5% of Ziggo it doesn't already own. It first showed its interest in Ziggo by buying 28.5% last year after Ziggo was listed by previous owners Warburg Pincus LLC and Cinven Ltd.

The cash-and-share deal as of Wednesday valued Ziggo shares at 35.26 euros. The target's stock slipped 0.08 euros to 33.26 euros in afternoon Amsterdam trading, indicating investors are only willing to bet on the deal succeeding if they're given a discount.

Liberty spent $23.3 billion last year buying the U.K.'s Virgin Media Inc. and 3.16 billion euros on German regional cable operator Kabel BW GmbH.

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