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
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United States (toll-free)
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719.457.2088
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United States
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+44 (0) 800.404.7656
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United Kingdom
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3431887
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Participant Passcode
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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.
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1 |
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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.
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References in this release to OCF refer to OCF as customarily
defined by Liberty Global.
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Assumptions underlying forward purchase multiple as estimated by
Liberty Global.
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Includes approximately 54 million shares issuable on conversion of
convertible debt.
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Before estimated transaction costs, expenses and the pre-closing
carrying cost of the debt of approximately $500 million.
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Annualized OCF is calculated by multiplying OCF for the latest
quarter by four.
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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:
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).