Virgin Media accepts £15bn bid from Liberty
Following yesterday’s news that Liberty Global was in talks to acquire Virgin Media, the two firms this morning confirmed that a bid has been made and accepted. Liberty is paying £15bn ($23.3bn) in cash and shares for control if Virgin, which is around £5bn less than its current enterprise value. However, it represents a 24 per cent premium on Monday’s closing price.
As mentioned in yesterday’s story, Liberty’s John Malone has a long history with rival media mogul Rupert Murdoch, who controls the UK’s popular Sky satellite TV service, and we can expect a renewal of hostilities if Liberty’s takeover of Virgin gets approval from the regulators.
Liberty says that as a result of this deal, it will move its operations from Delaware in the US to the UK, from where it will serve 25m customers in 14 countries. Virgin CEO Neil Berkett will relinquish his role, but the service will continue to trade in the UK under the popular Virgin name. No news as to whether or not the TiVo service will be retained or replaced with Liberty’s own on-demand technology.
Mike Fries, chief executive of Liberty Global, said that he would boost investment in Virgin’s DOCSIS fibre-based network to improve broadband speeds, but is unlikely to lay new fibre to increase its UK footprint, which covers 13m homes and serves 4.5m customers. Virgin’s relatively limited scale gives it a degree of freedom UK regulator Ofcom’s rules for operators holding ‘Significant Market Power’.
Fries added that he would expand the business telecoms and mobile activities of its European operations:
“Virgin Media will add significant scale and a first-class management team in Europe’s largest and most dynamic media and communications market. After the deal, roughly 80 per cent of Liberty Global’s revenue will come from just five attractive and strong countries – the UK, Germany, Belgium, Switzerland and the Netherlands.”
Outgoing Virgin CEO Neil Berkett said:
“Over the past six years, Virgin Media has transformed the digital experience of millions of customers. I’m confident that this deal will help us to build on this legacy. 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.”
As well as announcing the Liberty offer, Virgin also released financial results today for Q4. Its DOCSIS high-speed cable service was the big winner, accounting for most growth. It now accounts for 4.3m customers, with the slower ADSL2+ service having just 200,000 customers. Of the DOCSIS customers, 2.2m also use Virgin broadband with headline speeds ranging from 30Mbit/s to 120Mbit/s – up from 1.8m customers in the previous quarter.