Liberty Global to Acquire U.K.'s Virgin Media

Deal will expand LG's footprint to 25 million customers in 14 countries

By George Winslow -- Broadcasting & Cable, 2/5/2013 8:34:35 PM

Liberty Global has announced plans to acquire the U.K.'s largest cable company, Virgin Media, in a cash and stock deal that the two companies are valuing at around $23.3 billion in "enterprise value" or $16 million in "equity value."

The deal still needs shareholder and regulatory approval.

If approved, the agreement implies a price of $47.87 per Virgin Media share, reflecting a 24% premium to Virgin Media's closing price on February 4, 2013.

The deal reflects an ongoing interest by Liberty Media chairman John Malone to expand Liberty Media's already significant international footprint. It could also create tougher competition for News Corp.'s 39% owned BSkyB, which has long been the largest multichannel provider in the U.K. market.

The combined companies generated $16.8 billion of revenue and $7.5 billion of operating cash flow in 2012. They serve some 25 million customers in 14 countries.

Mike Fries, President and CEO of Liberty Global, noted in a statement that "adding Virgin Media to our large and growing European operations is a natural extension of the value creation strategy we've been successfully using for over seven years. Virgin Media will add significant scale and a first-class management team in Europe's largest and most dynamic media and communications market. After the deal, roughly 80% of Liberty Global's revenue will come from just five attractive and strong countries - the UK, Germany, Belgium, Switzerland and the Netherlands."

"Like all of our strategic acquisitions we expect this combination to yield meaningful operating and capex synergies of approximately $180 million per year upon full integration," he added. "But just as importantly, Virgin Media's market leading innovation and product expertise, particularly in mobile and B2B, will accelerate our own development of these business segments." 

The companies noted that Malone "controls in excess of 35% of the voting power of Liberty Global, and he has committed to support the transaction in his capacity as a shareholder."

For the transaction, LionTree Advisors acted as lead financial advisor to Liberty Global. Credit Suisse also acted as financial advisor and sole global coordinator and consent solicitation agent for the debt financing. Shearman & Sterling and Ropes & Gray served as legal counsel to Liberty Global.

On behalf of Virgin Media, Goldman Sachs & Co. and J.P. Morgan acted as financial advisors and Fried Frank and Milbank served as legal counsel. Goldman Sachs International acted as corporate broker to Virgin Media.