ONO Is Said to Consider Picking JPMorgan, Deutsche Bank for IPO

Jan 20, 2014 6:01 pm ET

Jan. 21 (Bloomberg) -- Grupo Corporativo ONO SA is close to hiring banks for an initial public offering, according to two people with knowledge of the matter.

The Spanish cable operator may pick Deutsche Bank AG and JPMorgan Chase & Co. in the coming weeks for the IPO after inviting banks to bid for the work, the people said, asking not to be identified before a final decision is made. Madrid-based ONO held talks with investment banks in December and could sell shares this year if it decides to proceed, the people said.

The broadband provider could be valued at about 6.4 billion euros ($8.7 billion) in an IPO including debt, or 8.5 times its 2012 earnings before interest, taxes, depreciation and amortization, said Francisco Salvador, a Madrid-based strategist at FGA/MG Valores.

ONO’s Ebitda in 2012 rose 0.5 percent to 752 million euros, a company statement showed. ONO had about 1.9 million residential customers and 118,000 small-office and home-office clients at the end of September. Its net debt at the time was 3.3 billion euros.

“Apart from its big debt level, its main handicap is that the company hasn’t been able to grow as fast as its peers while the broadband market in Spain is becoming more and more competitive,” Salvador said.

Telefonica, Jazztel

ONO’s 11.125 percent bonds maturing in July 2019 rose 0.9 cents on the euro this month to a record high 110.9 cents as of 5 p.m. yesterday in Madrid, according to data compiled by Bloomberg.

Chief Executive Officer Rosalia Portela said at an industry conference in the northern Spanish city of Santander in September that an IPO was “a priority, our goal, and we expect to be able to carry it out in the future.”

ONO has faced increasing price competition from rivals such as Telefonica SA, Spain’s biggest phone company, and Jazztel Plc. The company’s third-quarter Ebitda fell 9.3 percent from a year earlier to 172 million euros.

Among ONO’s shareholders, representatives for Thomas H. Lee Partners, Providence Equity Partners Inc. and CCMP Capital LLC didn’t comment. Representatives for JPMorgan, Deutsche Bank and ONO also declined to comment.

There has been speculation that ONO may be a takeover target for Newbury, England-based mobile-phone operator Vodafone Group Plc as Europe’s telecommunications industry undergoes a wave of mergers and acquisitions.

--With assistance from Katie Linsell in Madrid. Editors: Robert Valpuesta, Kenneth Wong