Patience pays off on Ziggo IPO

Ziggo was floated on the NYSE Euronext Amsterdam in March this year for €21.20 per share, raising €922m for the company. The share price at the time of flotation was already far higher than its original indication of €16.50–€18.50. However, contrary to previous private equity-backed flotations, which saw share prices plummet shortly after listing, Ziggo has continued to grow. The company has been on an upward journey since going public in March, reaching a trading price of €23.50 per share at the end of July. In contrast, Balderton Capital et al's Betfair floated at £13 per share in 2010 but gradually fell in price until hitting £7.73 in 2012.

The key to Ziggo's success may be found in the company's patient IPO strategy. Joseph Schull, head of Europe at shareholder Warburg Pincus told unquote" at the time of flotation that Ziggo was floated because "we felt that the company deserved to be public and, against a market backdrop of limited supply of cable equity, that an IPO of Ziggo would be well received". He explained that preparation and a progressive exit strategy were paramount in making the company's IPO successful. "Investors should have a sense that a company is going public because it can and wants to, not because of a capital structure imperative," he said.

The GPs had made sure Ziggo had a clear equity story and reduced leverage before going public – the company's leverage stood at 3.5x in June 2012 compared with 4.2x a year ago – in addition to public exposure and reporting experience through its issuance of public bonds in 2010. The aim for the investors was not to make a rapid exit, but to keep a large chunk of shares and continue realising value for a prolonged time alongside public investors. Schull explains: "We typically don't use IPOs as a direct means of exiting our investments and, as with Ziggo, we often sell a relatively modest share of the company's equity at IPO. The main goal is to crystallise value, create a market in the company's shares as it transitions from private to public ownership, and establish a path to an eventual exit while continuing to participate in future upside."

The patience has paid off for Warburg Pincus, Cinven and some affiliated shareholders as the latest sale of 29 million shares has banked gross proceeds of €681.5m. The investors still retain a combined 58% stake, equalling 117 million shares. Cinven alone has generated proceeds of €569m for its fourth fund following the transaction, including its remaining 22% shareholding in the company.

Latest revenue figures for Ziggo were up 6.3% year-on-year to €386.5m with an EBITDA of €219.2m – up 5.9% on the same basis.

unquote" interviewed Joseph Schull back in April. You can view the full video HERE.

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