3i Group has made its first investment in Brazil, acquiring a “significant minority stake” in Brazilian cable TV and broadband provider Blue Interactive Group. The deal is valued at about $55 million. Blue Interactive was formed in 2009.
3i, an international investor focused on private equity, infrastructure and debt management, today announces that it has entered into a binding agreement to acquire a significant minority stake in Blue Interactive Group (“Blue”), a Brazilian cable TV and broadband provider for R$100 million (approximately US$55 million). The completion of this transaction is subject to regulatory approval.
Blue was formed by Marcelo Lacerda, Silvia de Jesus and Sérgio Pretto in 2009 as an acquisition platform in the rapidly growing pay TV and broadband markets. Blue’s vision is to become a leading Brazilian company in the distribution of digital content and services to residential and business clients. The company focuses on mid-size cities with high pent-up demand for its services. Besides expanding its offering into other cities, Blue is also looking to introduce innovative products and services for its customers such as ‘Over the top’ which enables subscribers to access a library of downloadable films and ‘Iris’, which enables subscribers to monitor cameras in their business or home remotely.
Since 2009, the company has acquired majority stakes in cable TV companies, becoming the largest independent cable provider in Brazil with operations in 14 cities and 9 Brazilian states. Marcelo, Silvia and Sérgio are successful Brazilian entrepreneurs and pioneers in the Brazilian internet market. From 2009 to 2011, both Blue’s subscriber base and margins have more than doubled.
Going forward, Blue plans to continue to grow its penetration levels in the cities in which it currently operates as well as expand its network into other mid-sized cities where cable TV is unavailable. Blue will also look to grow through acquisition, where attractive.
Both the cable TV and broadband markets have been growing at attractive rates in recent years, posting annual average growth rates of 19% and 34% respectively
between 2005 and 2010. These markets are expected to continue to show strong growth over the next 5 years. Factors behind this continued growth include low penetration levels in Brazil compared to other markets, regulatory changes which enable greenfield opportunities to be pursued in mid-size cities where cable TV is not currently available and a growing, affluent middle class.
3i will help the company achieve its growth plans, not only by providing capital but also through applying its expertise in the telecommunications sector and its substantial M&A experience, which is critical in a sector where scale is a differentiating factor.
Through its Business Leader Network, 3i has introduced Richard Alden as chairman. Richard brings considerable experience from his time as CEO of ONO, a leading cable operator in Spain with approximately 2 million clients and revenues in excess of US$1.7 billion.
Silvia de Jesus, CEO of Blue, said: “We are delighted to welcome 3i as a shareholder. 3i has extensive experience of working in partnership with management teams and supporting the growth of leading companies. These strengths will enable us to continue our ambitious growth strategy”.
Marcelo Di Lorenzo, Partner, Managing Director and Head of 3i Brazil, commented: “Blue has performed well in recent years. The Brazilian cable TV and broadband market is undergoing significant change and we feel that Blue is well placed to take advantage of this new environment and further expand its offering across the country. We look forward to working with the management team to continue the company’s growth, both organically and by acquisition.”