VSS & GMT Offload German Cable Operator

LONDON: The German cable-TV operator Pepcom has been sold by private equity investors GMT Communications and Veronis Suhler Stevenson (VSS) to STAR Capital Partners.

Pepcom has more than 630,000 subscribers of video, broadband and voice services. GMT and VSS held equal stakes in an 81-percent interest in the company, with the remaining 19 percent controlled by Pepcom’s senior management and other individual shareholders. The German company was set up as a platform for consolidating the German cable TV market and has made a total of 12 bolt-on acquisitions. 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 with an HD-ready infrastructure.

Jeffrey Montgomery, managing partner of GMT, said: "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."