Virgin agrees $23bn merger with US-based Liberty Global

Branson

US cable TV operator Liberty Global Inc (NASDAQ:LBTYA) has agreed to take over UK broadband andcommunication group Virgin Media Inc (NASDAQ:VMED, LON:VMED) in a cash-and-stock deal worth some USD23.3bn (EUR17.1bn), in a move that would create the world’s leader in broadband communications, the pair said.

Under the terms of the deal, Virgin Media’s shareholders stand to receive USD17.50 cash, 0.2582 Liberty Global series A shares and 0.1928 Liberty Global series C shares for each of their Virgin Media unit. The transaction reflects a value of USD47.87 per share for Virgin Media, based on the buyer’s closing on 4 February.

The combined business will have 25m customers and cover 47m homes in 14 countries, the companies said. The merged entity will concentrate on the strongest and most strategic markets in Europe.

The two companies, with complementary strengths in product portfolio and expertise across digital TV, broadband and telephony services, digital TV, expect the increased scale to generate significant synergies. Liberty Global said the acquisition, in line with its value creation strategy, will add to its free cash flow.

The buyer will issue some 86m own class A shares and 65m class C shares as part of the price, which gives Virgin Media an equity value of USD16bn. The cash component will amount to USD5.9bn and will be covered with debt and available liquidity, Liberty said. The share exchange will see Virgin Media’s shareholders controlling some 36% of Liberty’s pro forma shares outstanding and around 26% of its votes. Following the merger, Liberty Global will redomicile from Delaware to the UK and be listed on the Nasdaq, with plans to also seek a European listing.

Subject to shareholders approval, the transaction is expected to wrap up in the second quarter of 2013.

LionTree Advisors, Credit Suisse Group AG (NYSE:CS), Shearman & Sterling LLP and Ropes & Gray acted as advisors to Liberty Global. Virgin Media used the advisory services of Goldman Sachs & Co, JPMorgan Chase & Co (NYSE:JPM) Fried Frank Harris, Shriver & Jacobson LLP and Milbank, Tweed, Hadley & McCloy LLP.

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