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John Malone's set to take on Rupert Murdoch in the UK and become the world's largest cable operator, outdistancing Comcast's video sub base by 3 million

Liberty Makes $23.3B Play for Virgin Media

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner

Dr. John Malone is about to become cable's kingpin once again.

Malone's Liberty Global Inc. announced Tuesday night that it will acquire U.K. service provider Virgin Media Inc. for $23.3 billion in cash and stock deal, creating a combined company that will serve 25 million customers and pass 47 million homes in 14 countries.

The deal (PDF), which followed a confirmation by Virgin Media earlier in the day that it was in M&A talks with Malone & Co., will make Liberty Global the world's largest cable operator from a subscriber standpoint, overtaking Comcast Corp. and its base of 22 million basic video customers.

With Virgin Media in the fold, 80 percent of Liberty's revenues will come from five countries: the U.K., Germany, Belgium, Switzerland and the Netherlands, Liberty Global President and CEO Mike Fries said, in the release announcing the deal. Liberty also operates systems in Puerto Rico, Chile, Austria, Ireland, the Czech Republic, Poland, Slovakia, Romania and Hungary.

Under the deal terms, Virgin Media shareholders will get $17.50 in cash, 0.2582 Liberty Global A shares and 0.1928 Liberty Global Series C shares for each Virgin Media share they hold. Based on the price of Liberty's C and A shares as of Feb. 4, the deal implies a price of $47.87 per Virgin Media share, and a 24 percent premium on Virgin's closing price on Feb. 4. The deal represents an equity value of about $16.0 billion, and an enterprise value of roughly $23.3 billion.

Liberty Media says the deal will produce $180 million in operating and capex synergies, and that the U.K. operator will help Liberty accelerate its expansion into other markets, such as mobile and business services.

And what's a Malone deal without some complexity? As part of it, Liberty Global intends to create a new holding company (a U.K. public limited company, or plc) to be listed on Nasdaq. Liberty said it might try to create a European listing down the road. Virgin Media will continue to operate under its own brand in the U.K. after the deal is closed.

Virgin Media and Liberty Global will discuss the transaction in more detail during a joint call set for Wednesday at 8:30 a.m. ET.

Why this matters
The acquisition gives Liberty Media its first entrée to the U.K., setting up a clash between Malone and Rupert Murdoch's BSkyB Ltd., the market's leading video service provider. The deal will also further cement Liberty Media's cable dominance in Europe and will put Malone (and Fries) in charge of the world's largest cable operator, a distinction Malone hasn't had since 1999, when he sold Tele-Communications Inc. (TCI) to AT&T Inc. for $48 billion.

The combination also gives Liberty Global more scale and the ability to drive and control its own technical agenda in much the way Comcast has in the U.S. with projects such as the Reference Design Kit (RDK) for set-top boxes.

For more

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
Jeff Baumgartner,
User Rank: Light Beer
2/6/2013 | 2:11:36 PM
re: Liberty Makes $23.3B Play for Virgin Media
They still need regulatory and shareholder approval, but on Wed.'s call they placed hopes that they can close the deal late in the second quarter of 2013.- As pro-forma ownership goes, Liberty Global shareholders are expected to own about 64%, with Virgin Media to own the balance (~36%). JB
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