TIDMVMED
Liberty Global to Acquire Virgin Media
Powerful combination creates the world's leading broadband
communications company
-- 25 million customers in 14 countries
-- Complementary strengths across video, voice & data products
-- Significant potential to monetize customer base
-- Substantial synergy opportunity
-- Accretive to free cash flow
-- Strengthened commitment to shareholder returns
Englewood, Colorado - February 5, 2013:
Liberty Global, Inc. ("Liberty Global") (NASDAQ: LBTYA, LBTYB
and LBTYK) and Virgin Media Inc. ("Virgin Media") (NASDAQ: VMED;
LSE: VMED) today announced that they have entered into an
agreement, subject to shareholder approvals, pursuant to which
Liberty Global will acquire Virgin Media in a stock and cash merger
valued at approximately $23.3 billion.
Under the terms of the agreement, Virgin Media shareholders will
receive $17.50 in cash, 0.2582 Liberty Global Series A shares and
0.1928 Liberty Global Series C shares for each Virgin Media share
that they hold. Based on Liberty Global's Series A share price of
$69.46 and Series C share price of $64.50 as of February 4, 2013,
this implies a price of $47.87 per Virgin Media share, reflecting a
24% premium to Virgin Media's closing price on February 4,
2013.1
A Powerful Combination
Creation of the world's leading broadband communications
company, covering 47 million homes and serving 25 million customers
across 14 countries. The combined company will be focused on the
strongest and most strategic markets in Europe, with the scale to
be at the forefront of technological change for customers.
Complementary strengths across product suite, with aligned
triple-play products, roadmap and expertise across digital TV,
broadband and telephony services. Mobility and B2B expertise offer
significant additional growth potential in key markets.
Significant potential to monetize customer base, with
opportunity to deliver current customers enhanced bundled and
premium services.
Substantial synergy opportunity, driven by scale advantages
across core functional areas.
Accretive to free cash flow, with combined track record of
exceptional free cash flow generation.
Increased commitment to shareholder returns, leveraging the
financial strength of the combined company, which generated $16.8
billion of revenue and $7.5 billion of Operating Cash Flow ("OCF")2
in 2012.
Mike Fries, President and CEO of Liberty Global, said: "Adding
Virgin Media to our large and growing European operations is a
natural extension of the value creation strategy we've been
successfully using for over seven years. 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% of Liberty Global's revenue will come from just
five attractive and strong countries - the UK, Germany, Belgium,
Switzerland and the Netherlands."
"Like all of our strategic acquisitions we expect this
combination to yield meaningful operating and capex synergies of
approximately $180 million per year upon full integration. But just
as importantly, Virgin Media's market leading innovation and
product expertise, particularly in mobile and B2B, will accelerate
our own development of these business segments."
"For these and other reasons, Virgin Media will be complementary
to our own organic revenue and OCF growth profile, while providing
attractive free cash flow enhancement to our shareholders. As a
result, we intend to increase our commitment to share buybacks
going forward with an initial target of approximately $3.5 billion
over a two-year period upon closing."
Virgin Media CEO Neil Berkett said: "Over the past six years,
Virgin Media has transformed the digital experience of millions of
customers, catalyzed a deep-rooted change in the UK's digital
landscape and delivered impressive growth and returns for our
shareholders. I'm confident that this deal will help us to build on
this legacy. Virgin Media and Liberty Global have a shared
ambition, focus on operational excellence and commitment to driving
shareholder value. 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."
Transaction Details
The implied purchase price, before taking into account
transaction costs and other expenses, represents an equity value of
approximately $16.0 billion and an enterprise value of
approximately $23.3 billion. This represents a purchase price
multiple of 8.8 times Virgin Media's 2012 OCF, and 7.0 times Virgin
Media's 2013 estimated OCF, after taking into consideration the
expected annual impact of approximately $110 million of operating
synergies that may be realized following full integration and after
adjusting the consideration to be paid for certain tax assets.3
The equity purchase price will consist of a combination of
shares and cash. Based on Virgin Media's fully-diluted shares of
335 million,4 Liberty Global would issue approximately 86 million
Liberty Global Class A shares and 65 million Liberty Global Class C
shares (in each case such shares will be shares of the plc with
substantially similar rights as the existing Series A and Series C
common stock of Liberty Global, as applicable). In addition, each
issued and outstanding share of Liberty Global common stock will be
exchanged for one share of a class of ordinary shares of a
newly-formed UK public limited company (plc) carrying substantially
similar rights as the existing series of Liberty Global common
stock exchanged. Based on issued and outstanding shares of Liberty
Global as of February 1, 2013 and adjusting for the transaction, it
is expected that Virgin Media shareholders will own approximately
36% of the pro forma shares outstanding of Liberty Global and have
approximately 26% of the voting rights.
The cash component of the equity purchase price, totaling
approximately $5.9 billion,5 will be funded largely through a
combination of debt financing and available liquidity of both
Liberty Global and Virgin Media. We intend to increase Virgin
Media's debt by more than $3.0 billion, such that on a pro forma
basis, Virgin Media's debt will fall well within our normal
leverage target of four to five times annualized OCF.6 Together
with the net proceeds of Virgin Media's debt financing, the
transaction will be funded with cash and other sources of liquidity
of Virgin Media and cash and borrowing availability under Liberty
Global's existing credit facilities. Adjusting for the transaction
and completion of the intended financings, we estimate the leverage
on the combined company would have been approximately 5 times at
December 31, 2012, which would serve as a modest deleveraging event
for current Liberty Global shareholders. We are targeting mid-4's
leverage by year-end 2014.
As part of its acquisition of Virgin Media, Liberty Global will
redomicile from Delaware to the United Kingdom by becoming a
subsidiary of a new holding company, a UK plc. Liberty Global's
current headquarters and other principal offices will remain in
place. Liberty Global will be listed on NASDAQ and will continue to
report earnings and other financial statements in accordance with
Securities and Exchange Commission regulations, including dollar
denominated financial statements. Liberty Global's Board of
Directors will continue to form the board of Liberty Global, with
the addition of one Virgin Media director to be named prior to the
closing. Liberty Global believes that the creation of a UK plc as a
new holding company will have several business and financial
benefits, including increased strategic and financial flexibility,
as it pertains to value creation for its shareholders. After
closing of the transaction, Liberty Global may look to implement a
European listing. Virgin Media will continue to operate under the
Virgin Media brand in the UK.
Based upon facts and circumstances as of the date of
announcement, Liberty Global believes that the share exchange as
structured may not be taxable to U.S. shareholders of Liberty
Global. However, the ultimate tax treatment of the share exchange
is not certain and is dependent upon the facts and circumstances at
the closing date, which are difficult to predict and are outside of
Liberty Global's control. The transaction is not conditioned upon a
determination as to the tax treatment for Liberty Global
stockholders. Further details will be provided in the proxy
statement which will be designed to enable Liberty Global
shareholders to evaluate the tax treatment with their own tax
advisors.
The transaction is subject to majority approval from both
companies' shareholders, regulatory approvals and other customary
closing conditions. The respective shareholder meetings, as well as
the closing of the transaction, are expected to occur in the second
quarter of 2013. Through certain trust arrangements, Mr. John
Malone controls in excess of 35% of the voting power of Liberty
Global, and he has committed to support the transaction in his
capacity as a shareholder.
In connection with the transaction, LionTree Advisors acted as
lead financial advisor to Liberty Global. Credit Suisse also acted
as financial advisor and sole global coordinator and consent
solicitation agent for the debt financing. Shearman & Sterling
and Ropes & Gray served as legal counsel to Liberty Global. On
behalf of Virgin Media, Goldman Sachs & Co. and J.P. Morgan
acted as financial advisors and Fried Frank and Milbank served as
legal counsel. Goldman Sachs International acted as corporate
broker to Virgin Media.
Conference Call to Discuss Transaction
We will conduct a joint call to discuss the transaction on
February 6, 2013 at 8:30 am EST (1.30 pm GMT). At that time,
management of both Liberty Global and Virgin Media may make
observations concerning their historical operating performance,
their results for the fourth quarter and full-year 2012 and may
make comments regarding outlook and other forward-looking
information. Please call at least 15 minutes prior to the start of
the teleconference.
888.299.7212 United States (toll-free)
719.457.2088 United States
+44 (0) 800.404.7656 United Kingdom
3431887 Participant Passcode
In addition to the teleconference, a live, listen-only webcast
will become available within the Investor Relations section of both
Liberty Global and Virgin Media's website. It is anticipated that
the webcast will be archived in the Investor Relations section of
both websites for at least 30 days.
Notice
Neither company is registering under the Securities Act of 1933
the offering of any securities that may be issued to finance the
transaction, and any securities so issued may not be offered or
sold in the United States absent an applicable exemption from the
U.S. registration requirements.
LionTree Advisors and Credit Suisse are not acting for anyone
other than Liberty Global, and Goldman Sachs and J.P. Morgan are
not acting for anyone other than Virgin Media and in each case will
not be responsible to anyone other than Liberty Global and Virgin
Media, as applicable, for providing the protections afforded to
their clients nor for providing advice in relation to the
transaction.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the transaction and the
anticipated consequences and benefits of the transaction, the
targeted close date for the transaction, our estimate of Virgin
Media's 2013 OCF, the intended financing, our estimate of synergies
and the value of certain tax assets, our expectation regarding
combined leverage and liquidity, our expectations with respect to
free cash flow and shareholder returns, our expectations with
respect to future growth prospects and the impact of the
transaction on our operations and financial performance, and other
information and statements that are not historical fact. These
forward-looking statements involve certain risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by these statements. These risks and
uncertainties include the receipt and timing of necessary
regulatory approval, the ability to finance the transaction
(including the completion of the debt financing), Virgin Media's
ability to continue financial and operational growth at historic
levels, the ability to successfully operate and integrate the
Virgin Media operation and realize estimated synergies, continued
use by subscribers and potential subscribers of Virgin Media's
services, the ability to achieve expected operational efficiencies
and economies of scale, as well as other factors detailed from time
to time in Liberty Global's and Virgin Media's filings with the
Securities and Exchange Commission ("SEC") including our most
recently filed Forms 10-K and 10-Q. These forward-looking
statements speak only as of the date of this release. We expressly
disclaim any obligation or undertaking to disseminate any updates
or revisions to any forward-looking statement contained herein to
reflect any change in the our expectations with regard thereto or
any change in events, conditions or circumstances on which any such
statement is based.
Additional Information and Where to Find it
Nothing in this press release shall constitute a solicitation to
buy or subscribe for or an offer to sell any securties of Liberty
Global, Virgin Media or the new Liberty Global holding company. In
connection with the proposed transaction, Liberty Global and Virgin
Media will file a joint proxy statement/prospectus with the SEC,
and the new Liberty Global holding company will file a Registration
Statement on Form S-4 with the SEC. STOCKHOLDERS OF EACH COMPANY
AND OTHER INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT
AND JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR
SUPPLEMENTS THERETO) REGARDING THE PROPOSED TRANSACTION WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Stockholders will be able to obtain a free copy of the registration
statement and joint proxy statement/prospectus, as well as other
filings containing information about Liberty Global, Virgin Media
and the new Liberty Global holding company, without charge, at the
SEC's Internet site (http://www.sec.gov). Copies of the
registration statement and joint proxy statement/prospectus and the
filings with the SEC that will be incorporated by reference therein
can also be obtained, without charge, by directing a request to
Liberty Global, Inc., 12300 Liberty Boulevard, Englewood, Colorado,
80112, USA, Attention: Investor Relations, Telephone: +1 303 220
6600, or to Virgin Media Limited, Communications House, Bartley
Wood Business Park, Bartley Way, Hook, RG27 9UP, United Kingdom,
Attn: Investor Relations Department, Telephone +44 (0) 1256
753037.
Participants in Solicitation
The respective directors and executive officers of Liberty
Global and Virgin Media and other persons may be deemed to be
participants in the solicitation of proxies in respect of the
proposed transaction. Information regarding Liberty Global's
directors and executive officers is available in its proxy
statement filed with the SEC by Liberty Global on April 27, 2012,
and information regarding Virgin Media's directors and executive
officers is available in its proxy statement filed with the SEC by
Virgin Media on April 30, 2012. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available. These documents can be obtained free of charge from the
sources indicated above.
About Liberty Global
Liberty Global is the leading international cable company, with
operations in 13 countries. We connect people to the digital world
and enable them to discover and experience its endless
possibilities. Our market-leading television, broadband internet
and telephony services are provided through next-generation
networks and innovative technology platforms that connect 20
million customers who subscribe to 35 million services as of
December 31, 2012.
Liberty Global's consumer brands include UPC, Unitymedia, Kabel
BW, Telenet and VTR. Our operations also include Chellomedia, our
content division, UPC Business, a commercial services division, and
Liberty Global Ventures, our investment fund. For more information,
please visit www.lgi.com or contact:
Investor Relations
Christopher Noyes +1 303 220 6693
Oskar Nooij +1 303 220 4218
Media
Hanne Wolf, Liberty Global +1 303 220 6678
Bert Holtkamp, Liberty Global +31 20 778 9800
Stanislas Neve de Mevergnies, Brunswick New York +1 212 333 3810
About Virgin Media
Virgin Media is the first provider of all four broadband, TV,
mobile phone and home phone services in the UK. The company's cable
network - the result of a multi-billion pound private investment -
delivers ultrafast broadband connections to over half of all UK
homes, with speeds of up to 100Mb, and is being expanded to reach
thousands more people across the country.
Virgin Media has developed the most advanced interactive
television service, bringing together broadcast TV, thousands of
hours of on demand programming and the best of the web in a single
set-top box powered by TiVo. The company was the first to offer HD
TV and 3D on demand to millions of UK households.
Virgin Media operates the most popular virtual mobile network in
the UK which, when launched, was the world's first such mobile
phone service. It is also one of the largest fixed-line home phone
providers in the country, with a fast growing B2B division
servicing both private and public sector organizations.
Virgin Media Inc. is listed on the NASDAQ Stock Market and the
London Stock Exchange (VMED).
Investor Relations
Richard Williams +44 (0) 1256 753037 richard.williams@virginmedia.co.uk
Phil Rudman +44 (0) 1256 752677 phil.rudman@virginmedia.co.uk
Media
Michelle Gordon +44 (0)20 7909 3292 michelle.gordon@virginmedia.co.uk
Gareth Mead +44 (0)20 7909 3289 gareth.mead@virginmedia.co.uk
Tavistock
Matt Ridsdale +44 (0) 20 7920 3150 mridsdale@tavistock.co.uk
Lulu Bridges +44 (0) 20 7920 3150 lbridges@tavistock.co.uk
1 In the transaction, Liberty Global will create a new holding
company, a UK public limited company (plc), listed on NASDAQ. The
shares delivered therefore will be shares of the plc entity with
substantially similar rights, as the current Liberty Global shares
of common stock.
2 References in this release to OCF refer to OCF as customarily
defined by Liberty Global.
3 Assumptions underlying forward purchase multiple as estimated
by Liberty Global.
4 Includes approximately 54 million shares issuable on
conversion of convertible debt.
5 Before estimated transaction costs, expenses and the
pre-closing carrying cost of the debt of approximately $500
million.
6 Annualized OCF is calculated by multiplying OCF for the latest
quarter by four.
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