With one foot already in the grave for its proposed deal to sell its Swiss division to Sunrise Communications, Liberty Global delivered the coup de grâce on Tuesday by announcing that talks had been terminated.
That formalizes the expected end of a troubled deal and comes almost two months after a rights issue key to the planned $6.39 billion sale of UPC Switzerland to Sunrise was scrapped.
Some Sunrise backers, including its biggest benefactor, Freenet, opposed the deal, arguing that the price was too high and, therefore, "unfavorable" to all Sunrise shareholders -- this despite CEO Olaf Swantee's insistence that the acquisition would be strategically important to Sunrise and its battles with Swisscom.
Liberty Global, meanwhile, refused to budge off its offer of $6.5 billion, but claims that it did try to keep the door open before deciding to move on.
"Despite our willingness to show significant flexibility on terms, it's clear to us that the Sunrise Board of Directors and their largest shareholder cannot agree amongst themselves on the best path forward," Mike Fries, Liberty Global's CEO, said in a statement.
Liberty Global and Sunrise forged the original deal in February 2019, and received regulatory approval in September. In October, Sunrise cancelled its extraordinary general meeting in the wake of the dispute with its largest shareholder, and cancelled the deal the following month. Even as it attempted to continue negotiations, Liberty Global had already received a break-up fee of CHF 50 million ($50.95 million).
Why this matters
The decision to scuttle further talks means that UPC Switzerland will remain with Liberty Global -- at least for now -- and serve as the centerpiece of a turnaround plan that Liberty Global has set forth in Switzerland.
That turnaround plan, which Liberty Global says is "on track," includes network upgrades to support 1-Gig broadband, deployment of Liberty Global's next-gen video service featuring new boxes and user interfaces, and a bigger push toward a fixed-mobile convergence model in Switzerland that the company has already pulled off in Belgium and Holland.
Before the Sunrise deal went south, Liberty Global had been pursuing a strategy in the region that would put more focus on markets where it's a "national challenger" and take it out of markets where it has less scale. That strategy largely fed Liberty Global's original idea to sell off UPC Switzerland, as well as its move to sell off operations in Germany, Hungary, Romania and the Czech Republic to Vodafone.
- Liberty Global Bags Sunrise Talks, Says Turnaround Plan 'On Track'
- Eurobites: Scrapping of Rights Issue Casts More Doubt on Swiss Sunrise-UPC Deal
- Liberty Global holds firm on Sunrise deal
- Eurobites: Sunrise/Liberty Deal Catches More Flak
- Storm Clouds Gather Over Sunrise's $6.4B Liberty Deal
- Liberty Global Faces Hurdles in Swiss Sale
— Jeff Baumgartner, Senior Editor, Light Reading