Inea valuation and capex plans divide pitching lenders; winner expected by mid-November

10 November 2017

he sale of Polish TV cable operator Inea is attracting a wide-range of leverage pitches, as banks disagree over the valuation, growth potential and capex requirements of the business. Banks backing bidders have pitched anything between high 4x and 8xEBITDA multiples, three sources familiar with the matter said.

 

Sponsor Warburg Pincus may have to come down from the PLN 1.5bn (USD 415m) it values Inea at, the sources said. The seller is expected to announce the winner by mid-November, after it renewed attempts to divest its 72% stake in the business, according to the sources. Binding bids were originally due in mid-September, but Warburg Pincus failed to find a buyer.

 

Meanwhile, a fourth source familiar with the matter said the winning bidder announcement could slip to mid-December. Between three and six bidders, both strategic and financial, remain in play and some of them, newcomers to the process, are still at due diligence stages, he said.

 

The sale process has attracted infrastructure funds Antin InfrastructureMacquarie Group and Partners Group, but also strategic buyers UPC and Orange Polska [WSE: OPL], according to two of the sources.

 

A Warsaw-based lawyer tracking the process has also tipped Antin and Orange Polska, but thought UPC, Poland’s biggest cable TV company, could be deterred from getting too involved in the process by potential antitrust issues.

 

UPC and Orange Polska did not reply to requests for comment. UPC, Macquarie and Antin were not immediately available for comment.

 

The wide discrepancy in leverage pitches and business valuations comes down to Inea’s substantial capex budget, as it rolls out its fibre optic network.

 

“The complication with this deal is that the company is split into two very different business legs,” said the first source. “The main part is the classic cable TV arm, which is cash-generating, and the second is the fibre-optic arm, which is still in the development stage. It is very hard to put a price on a business that is not yet operative. It will take about two years before the rollout is completed, and until then it will burn cash.”

 

The financing is likely to be exclusively in Polish zloty, given Inea’s concentration in western Poland, with all-senior TLA, TLB and RCF components, the three sources said.

 

The debt-to-equity split of the package is touted at 50:50, all sources agreed, but this will also depend on the final valuation. “Fifty-fifty debt-to-equity is the base case, but if the valuation remains around PLN 1.5bn and banks are not willing to offer more than 4.5x EBITDA because of concerns over capital expenditure, [the final package] might end up with more equity from the buyer,” the second source said.

 

Warburg Pincus was unavailable for comment. Inea did not reply to a request for comment.

 

Inea was founded in 1992 and is headquartered in Poznan. It offers cable TV, broadband, fixed and mobile telephony services to retails and business customers in western Poland. Warburg Pincus became a minority investor in 2013, subsequently increasing its stake to 72%.