STAR to sell German cable business for €608m

The UK-based fund manager stands to reap a 2x return multiple on its investment in the company, which it acquired in 2010 through a secondary deal.

STAR Capital Partners (STAR) has agreed to sell Pepcom, Germany’s fourth-largest cable operator, to rival telecoms group Tele Colombus.

The €608 million transaction values the business at a 10.0x EBITDA multiple, based on the last 12 months through to June 2015, and at 9.5x the forecasted EBITDA for 2015. A source with knowledge of the deal told Infrastructure Investor that STAR was set to make a 2x return on its initial investment, which is currently held in its €581 million, five-year-old Fund II.

The deal has been agreed by the board of Tele Columbus, subject to shareholders approving the required equity raising.

STAR acquired Pepcom in 2010 from London-based buyout firms GMT Communications Partners and Veronis Suhler Stevenson. According to reports published at the time, the company accrued revenues of about €69 million in 2008 and posted a loss of more than €6.1 million the year before.

STAR claims that Pepcom now has a customer base of more than 580,000 unique subscribers, with a network passing 1.6 million homes and 1,600 business customers.

The firm says the company has seen its revenue and EBITDA respectively grow 15 percent and 10 percent annually on average since 2010. Revenues for the year to 31 December 2014, which reached €126.3 million, generated earnings of €57.3 million.

This performance was achieved by expanding the company’s geographical footprint through organic growth and acquisitions, according to STAR, as well as through developing sales of triple play products (telephony, high-speed internet and TV).

Last January, the firm exited its stake in UK rail lessor Eversholt alongside London-listed 3i Infrastructure, US-headquartered Morgan Stanley Infrastructure Partners and Dutch pension administrator PGGM through a transaction that valued the company at £2.5 billion (€3.4 billion; $3.8 billion). Sources close to the matter confirmed at the time that 3i and STAR earned respective return multiples of 3.3x and 3.4x on the deal.

STAR II Fund had previously sold its stakes in German nursing home operator Alloheim and drilling rig equipment maker Blohm + Voss Oil Tools, to US buyout firm The Carlyle Group and oilfield products business Forum Energy Technologies respectively, in 2013.