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EQT considering exit of German cable company

EQT, a Swedish private equity firm, is trying to off-load German cable operator Kabel Baden-Wuerttemberg, either by a sale or a public listing, according to Reuters. EQT bought Kabel BW from Blackstone in April 2006 for about 1.3 billion euros ($1.8 billion). It has pumped a further 500 million euros ($696.2 million) in network expansion.

(Reuters) – Swedish private equity firm EQT is sounding out interest for German cable operator Kabel Baden-Wuerttemberg and is examining a sale or a public listing, people familiar with the matter told Reuters.

Financial and industry sources said it was only a question of time before EQT exits its investment in the Heidelberg-based provider of cable TV, internet and telephone services.

“EQT is evaluating the market,” one banker said, but added the efforts were still at an early stage.

Investor appetite has increased now that shares in market leader Kabel Deutschland (KDG) have risen 43 percent since owner Providence Equity Partners took the company public in March.

“EQT has owned the business for a good few years. It is natural they should look at what to do with it, especially after the KDG IPO,” said another London-based banker who advises private equity firms.

“I know lots of banks have met with EQT to offer ideas, but no one has been mandated to my knowledge.”

An initial public offering of Germany’s third-largest operator, which had 2.3 million customers last year, was under consideration, as was an outright sale, the sources said.

Providence had also considered selling KDG and at the start of the year potential investors had bid around 5 billion euros ($6.96 billion) for the company.

EQT bought Kabel BW from U.S. investment group Blackstone in April 2006 for around 1.3 billion euros and has invested around 500 million euros in network expansion.

Industry experts estimate that it could fetch an even higher price than investors were willing to bid for KDG.

“This is the pearl of the German cable sector,” an industry source said.

German competitors such as KDG and Unitymedia have also signaled interest in acquiring Kabel BW, but cartel issues pose formidable obstacles.

“We know KBW is coming to market in the foreseeable future,” KDG CEO Adrian von Hammerstein told the Financial Times in a recent interview. “There is a strong industrial logic for allowing consolidation, [but] this is not a view shared by the cartel office.”

The German cable industry has been constrained by regulation that effectively bans consolidation among large players. KDG in 2004 tried to merge with Kabel BW and Unitymedia to create a sizeable rival to telecom group Deutsche Telekom.

Anti-trust authorities thwarted the plans and the Federal Cartel Office last year reiterated that it believed a merger of the large cable companies was problematic.

U.S cable operator Liberty Global, which acquired Unitymedia last year, has said it was interested in more German acquisitions but cited cartel concerns as a stumbling block. Kabel BW had a net profit of 149 million euros in the first half of its 2009/2010 fiscal year, a gain of 22 percent. First-half sales jumped 14 percent to 269 million euros.

This year, Kabel BW has forecast double-digit growth for sales and core profit.

“People are starting to go through the (KBW) file. Any movement is months away, but we think EQT is gearing up to do something,” said one banker who advises telecom companies.

EQT and KBW declined to comment. (Reporting by Peter Maushagen, Philipp Halstrick, Alexander Huebner and Nicola Leske in Frankfurt and by Victoria Howley in London; Editing by Michael Shields)