Multinational cable giant Liberty Global has agreed to purchase UK cableco Virgin Media in a stock and cash merger valued at approximately US$ 23.3bn, creating the world’s largest broadband provider with 25mn customers across 14 countries.
The deal will also see Liberty Global up sticks and redomicile from the US state of Delaware to the UK by becoming a subsidiary of a new holding company, a UK public limited company (plc). Liberty Global’s current headquarters and other principal offices will remain in place however, and it will continue to be listed on the NASDAQ stock exchange.
A combined reach of nearly 50mn homes
The combined company will have a network footprint reaching 47mn homes and will be focused on the strongest and most strategic markets in Europe, with complementary strengths across aligned triple-play products, roadmap and expertise across digital TV, broadband and telephony services. Mobility and B2B expertise also offer “significant” additional growth potential in key markets.
Mike Fries, President and CEO of Liberty Global, said: “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.”
“Europe’s largest and most dynamic media market”
“Virgin Media will add significant scale and a first-class management team in Europe’s largest and most dynamic media and communications market,” added Fries. “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 US$ 180mn per year upon full integration. 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.”
Liberty Global believes that the creation of a UK plc as a new holding company will have several business and financial benefits, including increased strategic and financial flexibility. After closing of the transaction, Liberty Global may look to implement a European listing. Virgin Media will continue to operate under the Virgin Media brand in the UK.
Necessary approvals expected in Q2
The transaction is subject to majority approval from both companies’ shareholders, regulatory approvals and other customary closing conditions. The respective shareholder meetings, as well as the closing of the transaction, are expected to occur in the second quarter of 2013.
John Malone, Chairman of the Board at Liberty Global, currently controls in excess of 35% of the voting power of Liberty Global, and has committed to support the transaction in his capacity as a shareholder.