Tele Columbus acquires PrimaCom 16 July 2015
Disclaimer This document has been prepared by Tele Columbus AG (the "Company") solely for informational purposes. This presentation may contain forward-looking statements. These statements are based on management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Although we believe that such forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements. This presentation may contain references to certain non-gaap financial measures, such as Normalised EBITDA and Capex, and operating measures, such as RGUs, ARPU, Homes connected and subscribers pro forma calculation. These supplemental financial and operating measures should not be viewed as alternatives to measures of Tele Columbus s financial condition, results of operations or cash flows as presented in accordance with IFRS in its financial statements. The non-gaap financial and operating measures used by Tele Columbus may differ from, and not be comparable to, similarly titled measures used by other companies. For further information please see in particular the financial statements. This presentation also contains financial information as well as references to certain non-gaap financial measures and business information which are related to PrimaCom. This information derives from PrimaCom s annual report, from press releases or has been provided by PrimaCom s management. Tele Columbus has not verified this information and therefore assumes no liability for and offers no guarantee of the accuracy of this information. The presentation does not constitute or form part of, and should not be construed as, and offered to sell or issue, or the solicitation of an offer to purchase, subscribe to or acquire, securities of the Company, or an inducement to enter into investment activity in the United States. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. None of the Company, the companies in the Company's group or any of their respective directors, offices, employees, agents or any other person shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of the presentation or its contents or otherwise arising in connection with the presentation. We disclaim any obligation to publicly update or revise any forward-looking statements or other information contained in this presentation. It is pointed out that the existing presentation may be incomplete or condensed, and it may not contain all material information concerning Tele Columbus AG or the Tele Columbus Group or PrimaCom. 2
Transaction rationale Significant milestone in the consolidation of the German cable market Unique opportunity to further scale-up Tele Columbus operations and strengthen its position as the third largest player in the German cable market with c. 2.8 million combined homes connected 1 Significant potential for growth in Internet & Telephony and Premium TV services Combination of two well established Housing Association customer portfolios Attractive opportunity for scale effects across the combined customer and network base Substantial synergy opportunity due to network overlap and similarities of the two businesses Overlap of c.30% 2 between Tele Columbus and Primacom networks Tele Columbus intends to continue to play an active role in the consolidation of the German cable market and is currently actively pursuing other targets 1) Source: Tele Columbus company information as of March 2015, PrimaCom 2014 annual report; 2) Based on Tele Columbus estimates 3
Transaction highlights Transaction structure and consideration Tele Columbus has entered into an agreement to acquire 100% of the shares in PrimaCom, Germany s 4 th largest cable operator from Medfort S.à r.l., PrimaCom Finance (Lux) S.à r.l. and PrimaCom Beteiligungsgesellschaft mbh & Co. KG 100% cash offer valuing PrimaCom at an enterprise value of 711m on a cash and debt free basis Purchase price represents a multiple of 11.0x pre-synergies, and 8.7x post-synergies 1 based on PrimaCom s expected adjusted EBITDA 2015E 2 Significant synergy opportunity Financing Significant synergy opportunity is expected from the combination due to the substantial regional footprint overlap, scale effects between the two businesses and sharing of best practices and expertise Annual run-rate cost synergies of EUR 17.5 million and capex synergies of EUR 2.5 million are expected to be fully realised by 2017 Combination of cash on balance sheet, a fully underwritten financing including both a senior and junior tranche and a EUR 125 million equity bridge loan The equity bridge financing and potentially a proportion of the debt financing will be taken out by an equity rights issue and/or other equity and equity-like measures which are planned to be conducted in H2 2015 Post transaction and repayment of the equity bridge financing, the leverage is expected to increase to approximately 5.0x from 2.9x 3 (as of 31 March 2015), but may be lower depending on the size of the equity rights issue and/or other equity and equity-like measures Leverage is expected to return to the communicated medium-term range of 3.0-4.0x within 18-24 months Conditions and timing The transaction does not need regulatory approval and is not subject to merger control review Transaction closing is expected on 31 July 2015 1) Including expected full run-rate cost synergies; 2) Based on information provided by PrimaCom management; 3) Excluding finance leases 4
PrimaCom snapshot Company overview Key network statistics and KPIs (as of Dec 2014) 4 PrimaCom ( PC ) owns and runs a proprietary and highperformance hybrid fibre coax ( HFC ) network providing telecommunications and cable TV services to c. 1.2 million homes connected 1 PC is the 4 th largest cable operator in Germany and focuses mainly on Eastern German regions with presence in key Western Germany regions (Baden-Wuerttemberg, Hamburg and North Rhine-Westphalia) as well In 2014, PC generated total revenues of EUR 132 million and adjusted EBITDA of EUR 55 million (41.9% margin) 2 During the year, PC acquired cable network operator Deutsche Telekabel GmbH with c. 270k homes connected 3 The company currently employs c. 450 people 3, with corporate headquarters in Leipzig Homes connected Connected to own L3 network Upgraded for 2-way communication on own network Basic cable RGUs Digital RGUs Internet RGUs Telephony RGUs 57% of HCs c. 1.2m 1 83% of HCs c.645k / 56% of HCs c.235k / 37% of basic cable c.130k / 20% of IP ready c.120k / 18% of IP ready Blended ARPU: 14.62 1) Source: PrimaCom 2014 annual report; 2) Source: PrimaCom 2014 results press release; Financials pro-forma for 100% consolidation of DTK in FY2014A; does not include full run-rate DTK synergies (expected to be fully realised in 2015); 3) Source: PrimaCom 2014 results press release; 4) Unless otherwise stated, based on information provided by PrimaCom management (as of December 2014) 5
Eastern Parts Strengthening Tele Columbus position as the third largest player in the German cable market Tele Columbus footprint PrimaCom footprint c.20% c.80% Ratingen North Rhine- Westfalia Schleswig- Holstein Bremen Hamburg Lower Saxony Hanover Hesse Thuringia Mecklenburg- West Pommerania Berlin- Brandenburg Saxony- Anhalt Berlin Saxony Dresden >50k HCs <50k HCs Bremen North Rhine- Westfalia Hesse Schleswig- Holstein Hamburg Lower Saxony Saxony- Anhalt Thuringia Mecklenburg- West Pommerania Berlin- Brandenburg Berlin Saxony Rhineland- Palatinate Rhineland- Palatinate Distribution of homes connected Saarland Baden- Wuerttemberg Bavaria Saarland Baden- Wuerttemberg Bavaria Source: Tele Columbus company information as March 2015 Source: Based on information provided by PrimaCom management (as of December 2014) Side-by-side financials Homes connected (millions) m, 2014A Tele Columbus PrimaCom 1 8.3m 7.1m Revenues 213 132 Normalised/Adjusted EBITDA 99 55 % margin 46% 42% c.2.8m c.0.8m 1) PrimaCom 2014 results press release; Financials pro-forma for 100% consolidation of DTK in FY2014A; does not include full run-rate DTK synergies (expected to be fully realised in 2015) Note: KDG homes connected as per Q1 2015 report, UM customer relationships as per Q1 2015 report, Tele Columbus homes connected as per Q1 2015 report, PrimaCom homes connected as per Annual Report 2014, Pepcom households served as per Annual Report 2013 6
Overview of key network statistics side-by-side 1 Homes connected c.1.7m c.1.2m 2 2.8m+ Connected to own L3 network 72% of HCs 83% of HCs 2.0m+ 76% of HCs Upgraded for 2-way communication on own network 56% of HCs 57% of HCs 1.5m+ 57% of HCs Internet RGUs 208k c.130k c.335k + 21% of 2-way upgraded 0.92 175k c.120k c.295k + Telephony RGUs 19% of 2-way upgraded 0.87 Significant upside from further Level 3 migrations and upselling of Internet & Telephony 1) Source: Tele Columbus company information as of March 2015, PrimaCom unless otherwise stated based on information provided by PrimaCom management (as of December 2014) 2) Source: PrimaCom 2014 annual report 7
Tangible synergy opportunities identified Run rate p.a. 1 Key sources COGS Opex Capex 17.5m 2.5m Content costs Signal fees Purchase and Telephony costs Personnel costs Rent and utilities Marketing costs Procurement costs Combined capex investment program and network roll-out Integration costs Integration cost assumed to be 1x cost and capex synergies run-rate (split over first 24 months post closing) Revenue synergies Leverage TC online sale experience Leverage Primacom D2D sales experience Market mobile into Primacom IP base Source: Tele Columbus estimates; 1) Full run-rate expected to be achieved by 2017 8