The Corporate Restructuring Report-Liberty Global Plc (LBTYA) & Liberty Latin America Ltd. (LILA)
On December 29, 2017, Liberty Global Plc completed the split-off of its Latin America and Caribbean assets (LiLAC Group). Liberty Global Plc was organized into two trading stocks, Liberty Global Group (Nasdaq:LBTYA), comprising European operations, and LiLAC Group (Nasdaq: LILAC). Post-transaction, LILAC shares will be exchanged for shares in a new public company, Liberty Latin America Ltd. (Nasdaq: LILA).
The split-off is expected to create value by eliminating tracking stock discount. The split will aslo provide Liberty Latin with its own acqusition currency for M&A.
We see network upgrade (launch of DOCSIS 3.1) and availability of Netflix content into Liberty Global's pay TV offerings as major drivers of growth in the future. The recent business restructuring (Austria and possible Swiss business sale) point to a strong possibility of reopening of merger talks with Vodafone, which would be positive in our view.
LILA's growth prospects remain attractive. The company offers a way to capture the increased penetration of multichannel TV, broadband, and wireless voice across Latin America and Caribbean markets. We see M&A opportunities across the region which remains fragmented and underpenetrated. The company's results were hit by Hurricane Maria and Irma earlier this year. This is a temporary situation and doesn't affect the long-term opportunity.
Of the two, we prefer LILA given more upside. In our view, LBTYA is fairly valued and LILA is undervalued.
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