(Reuters) – European investment fund Star Capital is launching preparations to sell German cable group Pepcom and a separate deal to dispose of a stake in Eleclink, a company running a power cable connecting Britain and France, two people familiar with the matter told Reuters.
Star Capital has asked HSBC, which is leading a refinancing of Pepcom, to explore options for the company, the sources said on Thursday.
A bank is to be appointed soon for Eleclink, one of the people said.
Star Capital is also considering raising a fund of around 800 million euros ($900 million) in response to demand from investors, the person added, declining to be identified since the matter is private.
Star Capital and HSBC declined to comment. Pepcom was not immediately available to comment.
Pepcom is one of Germany’s largest cable companies. A sale of the business following the refinancing is likely to take place in the next 12-18 months, the sources said, cautioning that no deal was certain.
Pepcom’s debt is equal to its core earnings (EBITDA), one of the people said, adding most rivals have debts of at least 3-4 times their earnings.
“There is definitely room for a dividend recapitalisation,” the person added.
Pepcom has core earnings of 64 million euros. If the firm reaps a similar valuation as listed peer Tele Columbus , which trades at 10 times its core earnings, it may be valued at more than 600 million euros.
While Star Capital could market the asset to rival investors with a penchant for cable — like Carlyle, BC Partners , CVC or Cinven — it is also expected to discuss it with German cable operators.
“The antitrust authorities have started to take a different stance, so one should not rule out the possibility that they may allow a deal with Deutsche Telekom, Vodafone’s Kabel Deutschland , Unitymedia or Tele Columbus,” the person said. “In Germany it certainly makes sense to create bigger units.”
In the case of Eleclink, Star is targeting a trade buyer, the first source said, although the timeline for a deal is not yet certain.
Work is ongoing for Eleclink, a joint venture between Star Capital and Eurotunnel set up in May 2011 with the aim of developing a 1000 megawatt electricity interconnector between France and Britain.
Star would be looking to sell its 51 percent stake in the project, the source said. The companies said in 2011 that the investment would be around 250 million euros, although construction costs are currently closer to 500 million euros, the person added.