(Adds details on company and sector, quotes, no comment fromCarlyle)
By Freya Berry
LONDON, April 7 (Reuters) - Private equity firm Cinven madea 1.5 billion euro ($2 billion) capital gain on its investmentin French cable operator Numericable, but said onMonday the era of such hugely profitable deals for its industryin the cable sector is ending.
Cinven said on Monday that it had realised its biggest ever gain, giving a return of 4.35 times on the original investment,as part of a deal in which Numericable will buy Vivendi's telecoms arm SFR, creating the second-biggest player ina reshaped French telecoms market.
However, consolidation in the European telecommunicationssector with deals such as the SFR purchase means private equityfunds face a shrinking pool of available companies. This problemis partly of their own making as they sell off most of theirtelecoms assets, leaving the sector dominated by largecorporations.
"The role of private equity in European cable is probablycoming to an end," said Nicolas Paulmier, Partner at Cinven. "There may be a role in central Europe for a smaller player, butthe big deals for private equity in cable are now over," he toldReuters.
Cinven created Numericable nine years ago out of three cableoperators on which it spent 528 million euros. By 2008, whenU.S. private equity fund Carlyle also bought into Numericable, the company had a 99 percent share of the French cable market.
Under the weekend deal, Cinven and Carlyle have agreed toexchange their combined holding of 35 percent in the cable firmfor cash and shares in Altice, the holding company ofNumericable's billionaire backer Patrick Drahi.
Cinven's return was higher than the 2.8 times it made in2013 on its exit of Dutch cable operator Ziggo.
Carlyle declined to comment.
CONSOLIDATION THREAT
Private equity funds buy stakes in companies and try to makereturns to pay back to investors, often by building up a firmwith mergers and acquisitions (M&A) which they then sell on toother private equity funds, or companies in the same sector.
Numericable's 13.5 billion euro purchase of SFR is thelatest in a series of deals in the telecoms sector. Last month Vodafone bought Ono from several private equity firmsincluding Providence Equity for $10 billion,
Last year also saw several mega-acquisitions, includingLiberty Global's $15.8 billion purchase of VirginMedia and Vodafone's 7.7 billion euro buy-out of KabelDeutschland.
As available assets dwindle, the growing size of thecompanies involved will make it even harder for private equityfirms to outbid them for assets.
"I think cable will remain attractive for private equity butthey will have a hard time doing again what they did a few yearsago," said a source familiar with the Numericable deal.
Private equity has already lost out in overall M&A dealsthis year, and its global share is down by a third as fundsjostle with conglomerates seeking to spend vast cash pilesaccumulated since the financial crisis.
"There isn't really anything big left to buy unless someonewants to target Liberty Global. They've snapped up a lot ofassets, as has Vodafone, and there are few left to buy," said asector banker. ($1 = 0.7303 Euros) (Additional reporting by Anjuli Davies; editing by ClareHutchison and David Stamp)
Vodafone (VOD)