Liberty Global to Buy Virgin Media for $16bn

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By Jerin Mathew | February 6, 2013 4:25 PM EST

Liberty Global agrees to buy Virgin Media. Photo: Virgin Media

US billionaire John Malone's Liberty Global has agreed to acquire British cable operator Virgin Media in a deal that will mark the US group's entry into the UK cable market dominated by Rupert Murdoch's BSkyB.

The stock and cash deal has an enterprise value of about $23.3bn (£14.88bn, €17.16bn) and an equity value of $16bn, Liberty Global said in a statement . Virgin Media shareholders will receive $17.50 in cash, 0.2582 Liberty Global series A shares and 0.1928 Liberty Global series C shares for each Virgin Media share.

The deal values a Virgin Media share at $47.87 - a 24 percent premium to its closing price on 4 Februrary - based on Liberty Global's series A share price of $69.46 and ist series C share price of $64.50.  

The deal will create one of the biggest broadband communications company, serving 47 million homes and 25 million customers across 14 countries, according to Liberty Global.

"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," said Mike Fries, president and CEO of Liberty Global.  "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."

Liberty Global expects to save about $180m per year in operating and capex synergies upon full integration with Virgin Media.

In a response to press speculation, Virgin Media earlier confirmed that it is in talks with Liberty Global for a possible deal.

"The combined company will be able to grow faster and deliver enhanced returns by capitalizing on the exciting opportunities that the digital revolution presents, both in the UK and across Europe," Virgin Media CEO Neil Berkett said.

Virgin Media shares previously closed at 2,889 pence, up 17.30 percent, on the London Stock Exchange. Liberty Global class A shares declined by 2.27 percent and class C shares declined 3.55 percent on Nasdaq.

With the deal, Malone intends a direct competition with Rupert Murdoch, who controls BSkyB, the largest UK pay-TV operator.

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