Virgin Media has found a suitable buyer for itself in a cash and stock deal worth $23.3bn (£15bn) from US billionaire John Malone’s cable group, Liberty Global, which will be offering $47.87 (£30.57) per share, in an effort to create the UK’s second biggest pay-TV business after BSkyB. The Virgin Media-Liberty Global deal, which is yet to garner shareholders’ support and regulatory approval, will place John Malone very close to Rupert Murdoch, whose media empire owns 39% of BSkyB.
With the deal with Virgin Media, Liberty Global also hopes to bring Virgin’s expertise in serving business customers, which account for about 15% of its revenues, to Liberty Global’s other markets, where business customers account for just 6% of sales. Liberty Global has offered Virgin Media $17.50 (£11.17) in cash, 0.26 Liberty Global class A voting shares and 0.19 class C non-voting shares for each Virgin Media share. The terms of the deal imply a $16bn (£10.2bn) equity value, and an enterprise value of about $23.3bn (£15bn). Virgin Media shares closed 18% higher on Tuesday as Liberty Global slipped 2.3% to $67.88 (£43.35).
Liberty Global also operates cable assets in Germany, Belgium, and other countries across Europe, and with this deal it paves its way further to become a dominant player in the European television market, while reaching out to 25m customers. Liberty Global will move its domicile from Delaware to the UK, while retaining its US headquarters and Nasdaq listing.
A few sources close to the Virgin Media-Liberty Global deal say that John Malone’s thinking regarding the deal is motivated as much by what he sees as an opportunity to take advantage of Virgin Media’s tax losses and low interest rates, as it is by strategic considerations. The timing of the Virgin Media-Liberty Global deal also features some of the opportunism for which John Malone is known, coming just as Virgin Media is looking for a new chief executive.