February 6, 2013
John Malone's international cable business Liberty Global Inc. has agreed to acquire U.K. cable-television and Internet provider Virgin Media Inc. for $16 billion, in a deal that may create a stronger rival to market leader British Sky Broadcasting Group PLC. Liberty Global will pay for the deal using a mix of cash and its stock, totaling $47.87 per Virgin Media share, based on Monday's closing prices, the companies said in a joint statement Tuesday.
That reflects a premium of 24% to Virgin Media's closing price Monday, though it is only slightly higher than the closing price of $45.61 on Tuesday, when news of an imminent deal had already circulated. Virgin Media, the U.K.'s No. 2 pay-TV operator with close to five million customers, said earlier Tuesday that it was in talks with Liberty Global "concerning a possible transaction," without detailing what form any deal would take. Liberty and Virgin said they expect about $180 million in annual cost savings once the companies are fully integrated. "We think we've been conservative with that number," Liberty Chief Executive Mike Fries said in an interview. "The synergies are traditionally coming from areas like network and IT and procurement. What we do every day is buy technology from the same vendors and negotiate contracts from the same programmers."
The deal comes less a month after Liberty Global raised its stake in Belgian cable operator Telenet Group Holding NV to around 58% after failing to take full ownership in a tender offer it made to Telenet shareholders. While Liberty Global is based in Englewood, Colo., it focuses on markets outside the U.S. and has broadband networks in 13 countries, mainly in Europe. Liberty Global bought German cable provider Kabel Baden-Wuerttemberg for roughly $4.5 billion in 2011 and owns KBW's larger rival, Unitymedia. Liberty also plans to repurchase $3.5 billion in shares over a two-year period after the deal closes. Mr. Fries said he didn't plan to increase leverage immediately after the deal beyond the additional debt needed to fund it, but that could change. "We think it's the right amount of leverage to start out with," he said. "Over time we'll see how the business performs." As a result of the new share issuance, the companies expect current Virgin Media shareholders to own 36% of Liberty Global's outstanding shares with 26% of the voting rights.
A deal will put telecommunications billionaire Mr. Malone-who is chairman of Liberty Global-up against his former business partner and rival Rupert Murdoch. Mr. Murdoch is chairman of News Corp ., BSkyB's biggest shareholder, with a 39.1% stake in the satellite-TV operator. As well as against BSkyB, Virgin Media competes with BT Group, PLC's pay-TV offering, BT Vision. Liberty Global operates separately from Mr. Malone's U.S.-focused content business Liberty Media Corp., which has investments such as a majority stake in Sirius XM Radio Inc.
Liberty Media was a large shareholder in News Corp., posing a potential threat to the Murdoch family's control of the group, until 2008, when it exchanged its 16% stake in News Corp. for News Corp.'s 41% stake in U.S. satellite TV operator DirecTV . News Corp. also owns Dow Jones & Co., publisher of Dow Jones Newswires and The Wall Street Journal. The tie-up could be the largest shake-up in the U.K. telecom and media sector since the merger of T-Mobile and Orange's U.K. mobile network operators in 2010, according to Adrian Drury, an analyst at research firm Ovum. Sam Hart, media analyst at U.K. stockbroker Charles Stanley, said a combined company would pose a "stronger competitive threat" to BSkyB, which at the moment is "leaps ahead of the competition in terms of its financial strength and ability to bid for various content rights in sport and movies." A deal would also allow the enlarged group to invest in new technology, another area where BSkyB is the most proactive, he added. A spokesman for BSkyB declined to comment.
Espirito Santo Investment Bank believes Virgin Media is undervalued, particularly given the scale of its tax assets due to its multibillion-dollar cable infrastructure investment. Virgin Media had 4.85 million cable customers at the end of September, compared with BSkyB's 10.33 million TV customers at the end of December, according to company filings. Even though Virgin Media operates solely in the U.K., its primary listing is on the Nasdaq Stock Market in the U.S., a legacy of its creation in 2006 from the merger between NTL and Telewest. Those shares rose 18% to $45.61 on Tuesday, giving the company a market value of $12.2 billion. Virgin Media-whose combined TV and broadband interactive platform is powered by TiVo, the set-top box that is popular in the U.S.-is scheduled to publish its 2012 financial results on Wednesday. Wall Street Journal
Twitter Inc., the microblogging service that features 140-character status updates, is paying about $100 million to acquire startup Bluefin Labs, according to a person familiar with the matter. San Francisco-based Twitter announced the deal today in a blog posting. The person asked not to be identified because the price isn't being disclosed. Bluefin Labs, based in Cambridge, Massachusetts, makes software that lets advertisers, agencies and networks monitor and analyze social-media comments about TV shows and commercials.
Twitter, which plans to boost sales to a projected $1 billion in 2014, is building relationships in TV, where the bulk of advertising budgets are spent. Bluefin's technology may help Twitter expand a partnership formed in December with television- ratings provider Nielsen Holdings NV to measure the amount of Web discussion generated by TV programs. "As millions of people around the world experienced during Sunday's Super Bowl broadcast, Twitter is an amazing complement to live television viewing," Ali Rowghani, Twitter's chief operating officer, wrote in a blog posting about the Bluefin purchase today. "We look forward to working with Bluefin and our partners in the television industry to make the experience of Twitter and television even better." Jim Prosser, a spokesman for Twitter, declined to comment on the terms of the deal.
In June, a third of active Twitter users posted on the site about something they watched on TV, up from 26 percent of Twitter users at the beginning of the year, Nielsen said in a report on social media last year. Adults aged 35 to 44 are the most likely to discuss TV shows on social sites, the report found. Twitter bolstered its entertainment ties in November by naming Peter Chernin, a former News Corp. president, to its board. The appointment was intended to help the company navigate the media industry, Twitter Chief Executive Officer Dick Costolo said at the time. Technology blog Business Insider reported earlier that the price for Bluefin Labs was probably $50 million to $100 million. Bloomberg
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