Providence to push ahead with Kabel IPO

LONDON, Fe 20 (FT.com): Providence Equity, the US private equity group, has rejected several takeover offers from rival buy-out groups for Kabel Deutschland, opting to push ahead with a planned initial public offering of Germany's biggest cable company.

People familiar with the situation said Providence believed it could earn more from floating the company and selling its stake over time than it could by accepting one of the buy-out bids, which valued Kabel Deutschland at €5bn-€5.5bn ($6.8bn-$7.4bn).

The US private equity group, which first invested in the German company seven years ago, is challenging predictions that the IPO market may be closed after three private equity-backed companies were forced to delay planned listings in London last week.

Rival buy-out groups, including Bain Capital, Carlyle, Advent International, Hellman & Friedman and a consortium of CVC Capital Partners and BC Partners, attempted to pre-empt the planned listing of Kabel Deutschland by submitting bids last week.

The German cable group, chaired by former BSkyB chief Tony Ball, is expected to file its intention to float as early as next week. People familiar with its plans say it will seek to raise about €1bn, leaving Providence with a majority stake. Providence has appointed Morgan Stanley, UBS, Deutsche Bank and JPMorgan as advisers on the planned listing, which will provide the biggest test since the credit crisis of whether the IPO market is open for private equity.

Increased volatility in equity markets caused a string of private equity-owned companies to put off planned listings in London last week. These included Travelport, the travel reservation group; New Look, the fashion retailer; and Merlin Entertainments, the theme park operator.

However, others have pushed ahead with their IPO plans. Medica, a French and Italian care homes operator, floated in Paris last week, raising €313m for its owners BC Partners and Intermediate Capital Group, albeit at a reduced price.

In the UK, Promethean, the fast-growing interactive whiteboard maker, this week unveiled plans to float and allow its minority shareholder Apax Partners to sell out for a healthy profit.

Kabel Deutschland provides phone, television and internet services to more than 9m homes. It is expected to increase its earnings before interest, tax, depreciation and amortisation from €570m to about €650m in the year to March.

Liberty Media's recent €3.5bn deal to acquire Germany's Unitymedia from its private equity owners in November, indicate that Kabel Deutschland would be worth about eight times its annual earnings, or €5.2bn.