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STAR Capital Partners announces the sale of Pepcom

14 September 2015

STAR Capital Partners (“STAR“) have today announced that they have reached an agreement to sell Pepcom GmbH (“Pepcom”), Germany’s fourth largest cable operator to one of Germany’s largest cable market operators, Tele Columbus AG (“Tele Columbus”) (Xetra: TC1), for a consideration of €608 million. This represents an EBITDA multiple of 10.0x based on LTM through to June 2015 and 9.5x 2015F EBITDA. 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 GMT Communication Partners and Veronis Suhler Stevenson in a bilateral transaction with a view to driving growth based on:

  • expanding its geographic footprint both organically and by acquisition in the highly fragmented German market;
  • improving ARPU through the sale of triple play products (telephony, high speed internet and TV) across its continuously upgraded networks; and
  • the opportunities for larger scale M&A and consolidation in the German cable market.

During his period of ownership the STAR investment team has accelerated the strategic development of the company through a series of measures that included:

  • the acquisition of HL Komm, the Leipzig based city carrier which expanded its network footprint into new regions of Germany, diversifying away from Pepcom’s core customer base in Munich and taking the group into the business communications market to enhance growth potential;
  • integration of Residential and Business services across the group, generating greater value from common infrastructure;
  • innovative partnership initiatives, including working with municipalities and town communities, assisting them to capitalise on the German Governments initiative to build new infrastructure and enable rural communities to access high speed internet services;
  • the geographical expansion and future-proofing of its network through disciplined, “success-based” capital investment amounting to over €100 million in the last three years alone; and
  • the recruitment of a senior and highly entrepreneurial management team led by CEO Uwe Nickl, who in partnership with STAR and experienced non-executive director investor and senior advisor to STAR, Peer Knauer, delivered significant growth and value.

As a consequence, the company today provides high-speed internet and telephony services to over 580,000 unique subscribers with a network that passes 1.6 million homes with very low levels of churn, and 1,600 business customers. Its highly successfully strategic development has seen the company achieve revenue CAGR of 15% and EBITDA CAGR of 10%, since 2010. Revenues for the year ended 31 December 2014 amounted to €126.3 million, generating EBITDA of €57.3 million.

The sale represents another successful realisation for funds managed by STAR, which focuses on investing in and developing capital intensive and asset-based investment opportunities. The STAR II Fund has already generated significant returns to investors through the sale of investments such as Eversholt Rail Group for an equity value of approximately £1.1 billion in 2015 and other investments such as Blohm + Voss Oil and Tools, Blohm + Voss Industries and German nursing home operator, Alloheim. Following the completion of this deal, STAR believes that the STAR II Fund will be in the upper quartile of fund performance for its 2006 vintage, based on a number of metrics.

HSBC acted as sole financial adviser to STAR.

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