Investment group PPF buys Czech telco Nej.cz in billion-dollar deal

Czechia’s largest investment group PPF has acquired internet and television content provider Nej.cz from billionaire Karel Prazak’s Kaprain group.

PPF made the purchase of Nej.cz, which has almost a quarter of a million active customers, through its Cetin concern, Hospodarske noviny (HN) reported.

Prazak sold Nej.cz after a recent acquisition spree, as Kaprain scooped up a number of competitors in recent years. Cetin owns the telecommunications infrastructures of Czechia, Bulgaria, Hungary and Serbia, HN added.

Neither party commented on the price, which will be in the billions of crowns, HN wrote. The transaction still needs the approval of the Czech Antimonopoly Office. 

Sale came at right moment – billionaire

Prazak said “We built up Nej.cz into the third largest player on the market mainly thanks to the acquisitions of the most interesting telecommunications companies across the entire Republic. 

“At the moment, however, we do not see any further significant acquisition opportunities on the domestic market, and thus no room for our own expansion,” Prazak said in justification for the sale. Kaprain has completed its investment cycle and is now selling Nej.cz “at the right moment”, he added.

In addition to the around 250,000 customers, Cetin will also acquire the company’s optical networks, Kuki Internet TV and three data centres.

When negotiations on the sale of Nej.cz began last year, some experts estimated that the company would end up with the PPF group, where Prazak previously worked as a crisis manager, and with which he retains close ties. 

Stepan Flieger, head of mergers and acquisitions at consulting company EY’s Czech branch, said if the deal goes ahead “there is no longer room for organic growth, on the Czech market, especially for existing full-service operators.

“The acquisition of smaller providers is an opportunity to acquire new customers and infrastructure without the need to demand investments. Thanks to the significant cost synergies, it makes a lot of sense for them economically,” Flieger added.

The price and range of services provided to Nej.cz customers will remain in place, HN wrote, adding that Nej.cz remains the provider of Internet connection services to end customers.

Telcos remain good investment in difficult times

Telecommunications is an industry thriving even in the current tough times, attracting different kinds of investors, HN commented. Kaprain said several dozen domestic and foreign investors were interested, but Cetin made the best offer. 

In recent years the Nej.cz group has grown significantly by buying a number of internet providers, including Mcnet Internet and Telly CE. At the beginning of last year, it took over Smart Comp., which is the operator of the Netbox brand and the owner of Kuki TV. 

The expansion also resulted in an increase in profit. Last year, according to Kaprain, sales exceeded CZK 1.5bn in 2022, and the EBITDA (earnings before interest, taxes, depreciation and amortization) profit indicator indicates earnings over CZK 700mn. The value of Nej.cz could thus exceed CZK 7bn, HN said.

“We assume a higher multiple of EBITDA, a little over ten times would be a success for the seller,” Patria Corporate Finance executive director Petr Dedecek said.

 “From the Kaprain group’s point of view, this is an illustrative and successful example of a consolidation acquisition strategy,” Flieger said.