John Malone’s cable group, Liberty Global, has agreed to buy the UK’s Virgin Media in a cash and stock deal worth $23.3 billion. Virgin Media was created from the merger of NTL and Telewest, and Richard Branson’s Virgin Mobile. The deal will create the world’s largest broadband company, with 25 million customers in 14 countries.
In the UK, it will be the second biggest pay-TV business after BSkyB. The merger, subject to shareholder and regulatory approval, puts Malone in competition with Rupert Murdoch, whose News Corp. owns 39% of BSkyB.
Following the deal, about 80% of Liberty Global’s revenue will come from five European countries: the UK, Germany, Belgium, Switzerland and the Netherlands, reports The BBC.
“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,” said Mike Fries, Liberty Global CEO.
Under the terms, 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 that they hold.
This implies a price of $47.87 per Virgin Media share – a 24% premium to Virgin Media’s closing price on 2/4 – and gives the company an equity value of about $16 billion.
Alongside the announcement of the deal, Virgin Media reported a 30% rise in operating profit last year and added a record 88,700 new customers to its cable business during the year.
Virgin Group founder Sir Richard Branson, who retains a 3% shareholding in Virgin Media worth about $480 million, said: “This deal is good news for the company, its customers and our people. Together, Liberty Global and Virgin Media are in a great position to shake up the industry and bring the full power of digital technology to UK consumers.”
Neil Berkett, chief executive of Virgin Media, said: “The combined company will be able to grow faster and deliver enhanced returns by capitalising on the exciting opportunities that the digital revolution presents, both in the UK and across Europe.”
RBR-TVBR observation: Malone, Chairman of Liberty Global, clashed with Murdoch in 2007 when the two companies vied for control of DirecTV Group. It looks like he may have News Corp. in his competitive sights now. Ask Mel Karmazin—Malone is tough to cross swords with and seems to get what he wants. He just did with SiriusXM.