GMT Communications Partners (“GMT”) and Veronis Suhler Stevenson (“VSS”), both leading private equity investors in the media and communications sector, have sold PEPcom GmbH (“PEPcom”) to STAR Capital Partners (“STAR”) for an undisclosed sum. PEPcom is Germany’s sixth-largest cable TV operator, with more than 630,000 subscribers of video, broadband and voice services.
Both GMT and VSS were the control investors in PEPcom, holding equal stakes in the company amounting to an 81 percent interest, with the remaining 19 percent in the hands of PEPcom’s senior management and other individual shareholders. Under the terms of the agreement, senior management will roll-over a substantial part of their proceeds into the new investment vehicle controlled by STAR.
Set up as a platform investment designed to consolidate the fragmented German cable TV market, VSS and GMT built PEPcom through organic growth and the completion of 12 bolt-on acquisitions, targeting fully integrated regional networks in small towns where a strong market position existed. These included the 2005 purchase of Kabelfernsehen München ServiCenter GmbH & Co. KG (KMS), a Bavarian cable TV and broadband operator which more than doubled PEPcom’s business.
GMT and VSS provided financial support for PEPcom’s growth, reinvesting in the business to develop PEPcom’s product suite. Today, the company provides HD-ready TV delivery as well as analogue cable and digital pay TV, Internet services and VoIP telephony. PEPcom’s existing network was upgraded, and its own HFC network was built to meet consumer demand for HD-ready infrastructure.
Jeffrey Montgomery, Managing Partner of GMT commented:
“Against the backdrop of the toughest macro-economic environment in memory, we are delighted with this exit, which will help PEPcom accelerate its plans for future growth.
PEPcom is a great example of the investment opportunities available to investors with strong industry sector experience. Our deep understanding of the fragmented German cable TV market and our experience of the sector gave us the initial vision and subsequent commitment to build a consolidator that is now the sixth-largest operator in the main European market. We wish the team every success for the future.
PEPcom exemplifies GMT’s ability to identify and make platform investments and to support continuing additional investment, as part of a long-term strategic plan. GMT’s ability to identify a growth market investment opportunity, as well as the managerial talent to drive the business, is rooted in the strength and depth of its industry experience, its pan-European reach and its transaction experience.”
Johannes von Bismarck, Managing Director, and Morgan Callagy, Partner of VSS Europe, commented:
“PEPcom is a classic example of how VSS applies its proven buy-and-build investment strategy to small and mid-sized businesses that are profitable, often times operate in highly fragmented markets, yet can significantly benefit from our know-how and experience in developing them into market leaders through organic growth and strategic acquisitions. We had similar positive outcomes with other investments in the German language markets, including in the newspaper and the directory services sectors.
We are very pleased with this successful outcome – the result of a joint investment with our partners at GMT and PEPcom management, a seasoned leadership team with more than 20 years of experience in the cable TV and broadband industry. Together, we have been able to build an industry-leading high-growth and high-margin role-model for an industry consolidation, combining the deployment of state-of-the-art cable network technology, product development and marketing.
The PEPcom investment illustrates our diversified and regional investment approach in various parts of Europe where we have created value in geographies with different media consumption habits, business models and communication technology advances.”
Legal advice on the transaction was provided by Noerr LLP, Weil Gotshal & Manges, and Baker McKenzie. Deloitte served as a financial advisor.