Carlyle makes offer for Virgin Media

2 Jul 2007

The board of Virgin Media is considering taking the UK cable company private, after an approach from Carlyle Group raised the prospect of a USD10 billion sale, less than a year after another private equity approach was rebuffed. The change of attitude comes after a bruising battle for customers in the UK’s highly competitive pay-TV, broadband and telephony markets coincided with changes in the shareholder base, which could make a bid more likely to succeed now than last year. Sir Richard Branson’s Virgin Group, which owns 10.5% of the shares, is said by the Financial Times to be ‘supportive of a sale to a private equity group, after negotiating a ‘collar and cuff’ arrangement last month. This deal allowed the group to borrow about USD225 million against its holding in exchange for an agreement to pay Credit Suisse a share of the gains if the stock rises above USD31.98. Any bidder would have to buy out of work-in-partnership with Virgin Group, which has a 30-year exclusive branding agreement, with a ten-year opt-out clause, for use of the Virgin name.

Last year a group of private equity investors including Providence Equity Partners, Blackstone Group, Kohlberg Kravis Roberts and Cinven were given the cold shoulder, after a number of key Virgin shareholders turned down the approach. Providence is believed to be considering a new bid for the company.

United Kingdom, Virgin Media