Give the folks running Liberty Global (NASDAQ:LBTYA) some credit -- at least they're trying to move in the direction of growth. While recent decisions to sell a cable business and buy a broadband business might seem like rearranging deck chairs, a more charitable viewpoint might concede that the company is looking to maximize the growth potential of its portfolio of assets.
About a week ago, the company announced that it had reached an agreement to sell its Norwegian cable TV business. That in itself was no big surprise -- the expectation that the company would sell both the Norwegian and Swedish units was already in place. What was surprising was that the Norwegian business was sold separately and that the company got a pretty good price for it.
Selling out to a British private equity group by the name of Candover, Liberty Global will reap about $540 million from the sale. That values the unit at more than 10 times operating cash flow in a market where most people seem to have thought that Liberty Global would be happy to get an 8.5 multiple. After all, while the business serves about 350,000 customers, the Scandinavian market isn't seen as very high-growth anymore, and that's a big part of the reason that Liberty Global was looking to sell.
On the flip side, the company announced today that it is buying Austrian broadband company Inode. While the final purchase price has yet to be negotiated, the company said it is valuing Inode at an enterprise value just under $113 million. That's a multiple of only about 6.6 times next year's estimated operating cash flow and about 1.7 times this year's revenue.
While Inode is small, with about 100,000 broadband customers compared with TelekomAustria's (NYSE:TKA) 500,000-plus, it will fit into the company's pre-existing Austrian business. It should also aid the company's efforts to expand its broadband presence -- one of the faster-growing media opportunities in Western Europe.
Investors certainly aren't wild on Liberty Global, the latest John Malone creation, now that it's a hair's breadth from a new 52-week low. While it's true that the cable TV market in Western Europe isn't seeing the sort of growth that Central European Media (NASDAQ:CETV) is seeing in Eastern Europe with broadcast TV, that doesn't mean there isn't legitimate cash flow potential here. Trading where it does, this might be time to do some due diligence and see whether investors have pushed this one just a bit too low.
(Investors should note that there are three share classes for Liberty Global -- LBTYA, LBTYB, and LBTYK -- each with different prices and voting privileges.)
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
