ni-co Posted November 18, 2015 Share Posted November 18, 2015 It is clearly a great deal for CWC shareholders and Malone, but given the lack of tax benefits, it begs the question: Is it a good deal for Liberty Global (Liberty Global Group & LiLAC Group) shareholders? I don't doubt that. Europe has shown that quad play improves churn and therefore margins. Malone said at the LMCA shareholder meeting that he sees this as the future in all markets. It was really a very good opportunity for them to build out quad play in Latin America. Add to this the scale advandtages. Besides, I get the impression that they undersell the tax benefits. Their statement that they won't be able to use them doesn't sound that absolute to me. Look at the clever wording. What they haven't said is that they'll loose the benefits. And I don't think that they really paid for them… Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 18, 2015 Share Posted November 18, 2015 I don't doubt that. I understand the quad play synergies, but there is a big discrepancy between LiLAC's valuation before the deal (EV = 7.0 times EBITDA) and what they are paying for CWC (optimistically EV = 9.2 times EBITDA assuming unrealized synergies). And LiLAC group's existing shareholders are giving up close to 75% of existing businesses valued at 7 times EBITDA to get 25% of CWC valued at 9.2 times EBITDA unless I am missing something. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 18, 2015 Share Posted November 18, 2015 Existing LiLAC group shareholders owned $530M of EBITDA before the merger with CWC. After the merger, the New LiLAC group EBITDA is $1.4B, out of which 25.44% is owned by existing LiLAC shareholders, which puts their pro-rata share of EBITDA at $350 $356M. So the growth rate of EBITDA has to be very high post-merger relative to growth rate w/o CWC to justify this. Link to comment Share on other sites More sharing options...
ni-co Posted November 18, 2015 Share Posted November 18, 2015 I don't doubt that. I understand the quad play synergies, but there is a big discrepancy between LiLAC's valuation before the deal (EV = 7.0 times EBITDA) and what they are paying for CWC (optimistically EV = 9.2 times EBITDA assuming unrealized synergies). And LiLAC group's existing shareholders are giving up close to 75% of existing businesses valued at 7 times EBITDA to get 25% of CWC valued at 9.2 times EBITDA unless I am missing something. The deal is not completely paid for with LiLAC shares and LBTYA doesn't trade at 7x. However, I agree with you that a cash deal would have been better for LILA shareholders. But Malone wouldn't have sold for the same amount in cash because he's looking at after tax returns. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 18, 2015 Share Posted November 18, 2015 The deal is not completely paid for with LiLAC shares and LBTYA doesn't trade at 7x. I realize that but still it appears hugely dilutive to current LiLAC shareholders. See my previous post. They are giving up nearly $174M of EBITDA. Link to comment Share on other sites More sharing options...
ni-co Posted November 18, 2015 Share Posted November 18, 2015 The deal is not completely paid for with LiLAC shares and LBTYA doesn't trade at 7x. I realize that but still it appears hugely dilutive to current LiLAC shareholders. See my previous post. They are giving up nearly $174M of EBITDA. I think I generally agree with you. From the beginning, diluting existing LiLAC shareholders was kind of the point of Malone's sale to LiLAC. That's also why they made the offer so complicated. Malone wants to have a bigger part of LiLAC. I saw this coming and swapped my LILA for CWC (and I also posted it here). Now, he tries to make me take this "Recommended Offer" but I won't do it. However, I tend to disagree with the notion that, in an alternative universe, this offer would have been a cash offer with the same price tag. It just wouldn't have happened because Malone always looks at his after-tax returns. In the long run, this deal should be accretive anyway. And, as mentioned, I don't think they are completely candid with regard to how useful the tax losses are. If you don't agree, you are free to vote against it at the shareholder meeting. Malone's votes will be suspended. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 18, 2015 Share Posted November 18, 2015 Actually, the deal is better than I originally thought for current LiLAC shareholders. It is true that existing LiLAC shareholders' share of combined EBITDA post merger is lower, but so is their share of debt. After the deal, their share of debt comes to $1.3B, lower than the current $2.1B debt. As a result, today's LiLAC share price implies a post merger EV/EBITDA of 8.3 for the New LiLAC Group. Link to comment Share on other sites More sharing options...
moatsandvalue Posted November 19, 2015 Share Posted November 19, 2015 LiLAC shareholders had a business valued at no more tan ev/ebitda 8 (Chile & PR). With cwc operation, they change and will own a business valued at 9,5x ebitda. Calculation: TTM proportionate ebitda cwc: $668 synergies cwc-colombus: $100 Net debt cwc: $3125 TTM ebitda LiLAC ex minority interest PR: $490 - (186.5 * 40%) = 415.4 Net debt LiLAC: $2150 Ownership LiLAC actual shareholders: 25.44% mkt value 25.44% = $1600 ev/ebitda x9.5 Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 19, 2015 Share Posted November 19, 2015 According to the press release announcing the deal, the New LiLAC group will have an EBITDA of $1.4B which is about $140M higher than your numbers. Also you deducted the minority interest in PR but you did not consider the debt attributed to minority interest. Link to comment Share on other sites More sharing options...
Fat Pitch Posted November 19, 2015 Share Posted November 19, 2015 The deal is not completely paid for with LiLAC shares and LBTYA doesn't trade at 7x. I realize that but still it appears hugely dilutive to current LiLAC shareholders. See my previous post. They are giving up nearly $174M of EBITDA. I think I generally agree with you. From the beginning, diluting existing LiLAC shareholders was kind of the point of Malone's sale to LiLAC. That's also why they made the offer so complicated. Malone wants to have a bigger part of LiLAC. I saw this coming and swapped my LILA for CWC (and I also posted it here). Now, he tries to make me take this "Recommended Offer" but I won't do it. However, I tend to disagree with the notion that, in an alternative universe, this offer would have been a cash offer with the same price tag. It just wouldn't have happened because Malone always looks at his after-tax returns. In the long run, this deal should be accretive anyway. And, as mentioned, I don't think they are completely candid with regard to how useful the tax losses are. If you don't agree, you are free to vote against it at the shareholder meeting. Malone's votes will be suspended. Ya I also avoided some of the dilution by moving to CWC. Now that Malone is going to have a sizable stake I don't think he'll dilute himself going forward. LILAC shareholders traded 2 stranded cable assets for a larger asset that will create scale and get this cash flow machine going. Other cable assets such as Digicel are now screwed since their cost of debt is 11%+ and no access to equity markets. With 1.4b in EBITDA and prob ~700mm+ FCF/yr we should start seeing some consolidation occurring. Link to comment Share on other sites More sharing options...
giofranchi Posted November 19, 2015 Share Posted November 19, 2015 Now that Malone is going to have a sizable stake I don't think he'll dilute himself going forward. +1 With 1.4b in EBITDA and prob ~700mm+ FCF/yr we should start seeing some consolidation occurring. +1 Cheers, Gio Link to comment Share on other sites More sharing options...
moatsandvalue Posted November 19, 2015 Share Posted November 19, 2015 According to the press release announcing the deal, the New LiLAC group will have an EBITDA of $1.4B which is about $140M higher than your numbers. Also you deducted the minority interest in PR but you did not consider the debt attributed to minority interest. Take cwc proportionate ebitda. There are some minority interests as well there. You are right in the debt (-376,8), but even after taking into account this, it's a multiple higher than 9x ebitda. Link to comment Share on other sites More sharing options...
folivera13 Posted November 19, 2015 Share Posted November 19, 2015 LTM multiple is high but key is forward multiple including any synergies Liberty can extract. Once growth and extra synergies are taken into account valuation looks cheap. Add on accretive M&A and it can be a home run. Key is meeting growth expectations. If they grow EBITDA at 5% versus 10-11%, the tracker will take a big hit. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted November 19, 2015 Share Posted November 19, 2015 moatsandvalue, You are right about the proportionate CWC numbers. I think we will get the pro-forma financials in the near future and allocation of debt and EBITDA among the three entities will be clearer then. Link to comment Share on other sites More sharing options...
Jurgis Posted November 30, 2015 Share Posted November 30, 2015 LILAK vs LILA reverse spread is 5%. This is rather nuts. Unfortunately I swapped to LILA some time ago. Link to comment Share on other sites More sharing options...
muscleman Posted December 1, 2015 Share Posted December 1, 2015 LILAK vs LILA reverse spread is 5%. This is rather nuts. Unfortunately I swapped to LILA some time ago. I wonder why is this happening at all. :o The liquidity discount shouldn't be so high. Link to comment Share on other sites More sharing options...
Jurgis Posted December 1, 2015 Share Posted December 1, 2015 In all other Liberties, C/K trade at 0-5% discount. IMO it's a great time to swap LILAK to LILA. But then I said that couple months ago when they were at same price. ;) Link to comment Share on other sites More sharing options...
muscleman Posted February 19, 2016 Share Posted February 19, 2016 http://www.sec.gov/Archives/edgar/data/1570585/000157058516000397/exhibit991lgearningsreleas.htm The LILA results were not as good as I expected. If 2016 guidance for EU and Latin's growth are similar, why should I keep the LILA shares in this geographically unstable area instead of LBTYK shares for a more stable EU economy? ::) Link to comment Share on other sites More sharing options...
Liberty Posted February 19, 2016 Author Share Posted February 19, 2016 http://www.sec.gov/Archives/edgar/data/1570585/000157058516000397/exhibit991lgearningsreleas.htm The LILA results were not as good as I expected. If 2016 guidance for EU and Latin's growth are similar, why should I keep the LILA shares in this geographically unstable area instead of LBTYK shares for a more stable EU economy? ::) They clearly guided to double-digit EBITDA growth when CWC closes, and there are many more targets after that. But you can sell them if you want. Malone might be on the other side of that transaction, you never know... He seems to want those shares, he opted to convert his CWC stake to LiLAC rather than LGI. Link to comment Share on other sites More sharing options...
muscleman Posted February 20, 2016 Share Posted February 20, 2016 http://www.sec.gov/Archives/edgar/data/1570585/000157058516000397/exhibit991lgearningsreleas.htm The LILA results were not as good as I expected. If 2016 guidance for EU and Latin's growth are similar, why should I keep the LILA shares in this geographically unstable area instead of LBTYK shares for a more stable EU economy? ::) They clearly guided to double-digit EBITDA growth when CWC closes, and there are many more targets after that. But you can sell them if you want. Malone might be on the other side of that transaction, you never know... He seems to want those shares, he opted to convert his CWC stake to LiLAC rather than LGI. Hmm... I think I might get confused with EBITDA growth vs OCF growth. OCF involves working capital but EBITDA does not. I did remember reading before that they think EBITDA growth can be in the 13%-15% range. If the depreciation method is similar, and they guided the same OCF growth for Liberty Global, does that imply that Liberty Global can also grow at that rate? Link to comment Share on other sites More sharing options...
Liberty Posted February 20, 2016 Author Share Posted February 20, 2016 The lilac guidance doesn't include CWC because it hasn't closed, but on the call they give more details. Link to comment Share on other sites More sharing options...
PSV_Cannibal Posted May 6, 2016 Share Posted May 6, 2016 Has anyone attempted to figure out LILA's valuation proforma the CWC transaction? It'd be nice to know what this thing trades at on a P/CF basis. Link to comment Share on other sites More sharing options...
Liberty Posted May 16, 2016 Author Share Posted May 16, 2016 Apparently Fries was on TV today and all but confirmed that LBTYA would distributed the LiLAC shares. Also, http://www.bloomberg.com/gadfly/articles/2016-05-16/john-malone-should-revamp-liberty-lilac-tracking-stocks Link to comment Share on other sites More sharing options...
merkhet Posted May 16, 2016 Share Posted May 16, 2016 Apparently Fries was on TV today and all but confirmed that LBTYA would distributed the LiLAC shares. Also, http://www.bloomberg.com/gadfly/articles/2016-05-16/john-malone-should-revamp-liberty-lilac-tracking-stocks I thought that was always the plan? The issue was whether to do it all at once or over time? Link to comment Share on other sites More sharing options...
Liberty Posted July 14, 2016 Author Share Posted July 14, 2016 CWC results: http://phx.corporate-ir.net/phoenix.zhtml?c=191835&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTExMDM3ODI2JkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3 Link to comment Share on other sites More sharing options...
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