Escaline wants more PrimaCom

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Consolidation continues to move forward in the German cable market as evidence by Thursday's takeover bid by Luxembourg group Escaline for Germany's PrimaCom.

Through holding company Omega, Escaline already controls 25.3% of PrimaCom but the group wants a majority stake. Its goal is to merge PrimaCom's networks with those of Escaline's German subsidiary Orion Cable.

Such a move would boost Escaline's German cable subscriber base from about 3.2 million to 4.1 million.

Orion Cable has been gobbling up Germany's midsize cable companies in a bid to compete with market leader Kabel Deutschland (KDG). In 2006, Orion swallowed Tele Columbus and a year before that, absorbed ewt multimedia.

KDG, which serves about 10 million cable subscribers in Germany, also had bid for PrimaCom, signing a deal in June to take a 18.6% stake in the company. But that move was blocked by regulatory authorities.

Escaline has bid €10 ($13.7) a share for PrimaCom stock. While that is a substantial premium compared with PrimaCom's share price of the past six months, it is below the stock's current value of €10.16 ($13.9).

If the bid succeeds, Escaline plans major investment and expansion in the German market.

But Escaline managing director Robert Fowler said the company will hold onto its minority stake in PrimaCom even if the takeover bid is unsuccessful.

Germany's potential can clearly be seen in KDG's year-end figures for 2005-06, which the company released Thursday. Revenue at KDG jumped 8% to €1.1 billion ($1.5 billion) and operating (EBITDA) profits almost doubled from €152 million to €281 million ($385 million). KDG, however, still booked a net loss of €99 million ($136 million), due primarily to massive investment in its broadband Internet and telephony services.
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