LGI to acquire Virgin Media in USD16 billion stock and cash merger

6 Feb 2013

Just a day after reports emerged that Liberty Global Inc (LGI) was in negotiations to acquire UK cableco Virgin Media, the pair have confirmed that they have reached a deal. Under the terms of the agreement, it has been confirmed that Virgin Media shareholders will receive USD17.50 in cash, in addition to 0.2582 LGI Series A shares and 0.1928 LGI Series C shares, for each share they hold in the UK operator. Based on LGI’s Series A share price of USD69.46 and Series C share price of USD64.50 as of 4 February 2013, a press release confirming the acquisition noted that this implies a price of USD47.87 per Virgin Media share. As such, the implied purchase price of the entire transaction, before taking into account transaction costs and other expenses, represents an equity value of approximately USD16.0 billion and an enterprise value of approximately USD23.3 billion. Meanwhile, the USD5.9 billion cash component of the equity purchase price is to be funded ‘largely through a combination of debt financing and available liquidity of both LGI and Virgin Media’. The transaction, however, remains subject to majority approval from both companies’ shareholders, while it will also require regulatory approval. Respective shareholder meetings for both Virgin Media and LGI are expected to occur in the second quarter of 2013, with the closing of the transaction also likely at that date.

Commenting on the development, Virgin Media CEO Neil Berkett stated: ‘Over the past six years, Virgin Media has transformed the digital experience of millions of customers, catalysed a deep-rooted change in the UK’s digital landscape and delivered impressive growth and returns for our shareholders. I’m confident that this deal will help us to build on this legacy.’

Separately, Virgin Media has also released its financial results for the three- and twelve-month periods ended 31 December 2012, with the cableco revealing a 2.7% year-on-year increase in full year turnover to GBP4.10 billion (USD6.49 billion). With revenues in the last quarter of the year also rising by 1.6% y-o-y to GPB1.04 billion, the operator attributed the positive performance to a number of factors, including what it termed an ‘ongoing improvement of customer base mix’. Notably, Virgin Media reported that the number of customers signed up to its ‘superfast’ broadband services – those offering downlink speeds of 30Mbps of higher – had increased by 1.5 million in the year, and 419,400 in 4Q12. At the end of the year, Virgin Media’s total broadband subscriber base meanwhile stood at 4.272 million, up from 4.102 million a year earlier, while at that date it also reported 4.179 million fixed telephony customers.

United Kingdom, Liberty Global (incl. LGI), Virgin Media