Liberty global virgin media merger analysis
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Liberty Global – Virgin Media Merger Analysis. Krunal Intwala Samantha Hess Joe Cardoso Anisha Gandhi Michael Schneider. May 9 th , 2013. Liberty Global & Virgin Media | May 9 th , 2013 1. Executive Summary. Recommendation Buy Virgin Media

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Liberty Global – Virgin Media Merger Analysis

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Liberty global virgin media merger analysis

Liberty Global – Virgin Media Merger Analysis

KrunalIntwala

Samantha Hess

Joe Cardoso

Anisha Gandhi

Michael Schneider

May 9th, 2013

Liberty Global & Virgin Media | May 9th , 20131


Executive summary

Executive Summary

  • Recommendation Buy Virgin Media

    • The Merger will create world’s leading broadband communications company

    • Liberty Global will gain access to UK market

    • It will add 5 million customers to Liberty Global’s existing 20 million customers

    • Combined synergy

      • $110 million in cost savings

      • $60 million in CapExsavings

  • Terms of Acquisition

    • The deal is $23.3 billion with offering premium of 24% at $47.87 Virgin Media share

    • 36% of Liberty Global’s shares will be owned by Virgin Media Shareholders with approximately 26% of voting rights

  • Company Description

    • Liberty Global: Leading international cable operator in Europe and South America serving 13 countries

    • Virgin Media: Leading provider of entertainment and communication services in the United Kingdom

  • Industry Outlook

    • Industry is expected to grow until 2016 at an average annual rate of 4.55% (exception for telephony industry)

Liberty Global & Virgin Media | May 9th , 20132


Decision

Decision

Recommendation: Buy Virgin Media

  • World’s leading broadband communication company

  • Liberty global will gain access to UK market

  • Complementary strengths across video, voice and broadband products

  • Combined synergy

    • $110 million in cost savings

    • 60 million in CapExsavings

  • Combined company will have more leverage over negotiating contents licenses

  • Liberty Global will benefit from tax breaks from past Virgin Media’s capital losses

    • In December 2012, Virgin used the differed tax benefit approximately $4 billion

  • Liberty will be relocated to the United Kingdom by becoming a subsidiary of a new holding company, a UK plc.

Liberty Global & Virgin Media | May 9th , 20133


Terms of acquisitions

Terms of Acquisitions

  • Deal Size = $23.3 billion dollars

  • Deal Price = $47.87 per Virgin Media share

    • 24% Premium

  • Cash & Stocks Offer

    • $17.50 in Cash

    • 25.82% of LG Series A Shares

    • 19.28% of LG Series C Shares

    • LG will issue approximately $86 million LG Class A shares and 65 million LG Class C shares.

    • 36% of Liberty Global’s shares will be owned by Virgin Media Shareholders with approximately 26% of voting rights


Virgin media dcf analysis

Virgin Media DCF Analysis


Virgin media implied enterprise value

Virgin Media Implied Enterprise Value


Virgin media implied share prices

Virgin Media Implied Share Prices


Liberty global key facts

Liberty Global Key Facts

John Malone, Chairman

Revenue: $10.3 billion (in millions)

Customers: 19.8 million

Michael Fries, President & CEO

Headquarters: Englewood, Colorado

Employees: 22,000+

Revenue: $10.3 billion dollars

Customers: 19.8 million

34.2 million homes passed

34.8 million RGUs


What is liberty global

What is Liberty Global?

  • Liberty Global is a leading international cable operator with operations across 13 countries.

  • Their products/services include… (not a complete list)

    • Cable: Basic and premium programming, HD, DVR, HD-DVR, VoD, an electronic programming guide, etc. (45% of revenue)

      • Chellomedia: Producer and distributor of TV channels.

      • Content: 67 channels, of which 48 are 100% owned.

      • Revenue: 514 million dollars in 2012, 3% of total revenue.

      • Distribution: 390 million TV households.

    • Internet: High speed Internet access ranging from 100 Mbps to 150 Mbps.

      • 24% of revenue

  • Telephony: Various different telephone services, dependent on customer. (International calling, minute packages, telephone rental, etc.)

    • 15% of revenue

  • Business Services: Designed with the customer in mind to meet their specific needs.


  • The americas

    The Americas

    • Puerto Rico

      • Largest cable operator

      • 479,000 service subscribers

    • Chile

      • Largest multi-channel television provider


    Europe

    Europe

    • Austria, Belgium, Czech Republic, Hungary, Ireland, Poland, Slovakia and Switzerland. (9)

      • The largest cable operators in their respective markets.

    • Germany, Netherlands and Romania. (3)

      • 2nd largest cable operators in their respective markets.

      • Germany alone accounts for 22% of Liberty’s total revenue.


    What is liberty global s strategy

    What is Liberty Global’s Strategy?

    • Telnet

    • Astral

    • NTL Ireland

    • Inode

    • Liberty’s business strategy has two main components…

      • Organic Growth

        • Innovation

          • Horizon TV

          • Mobile Services

        • Bundling Products & Services

          • Single-Play  54%

          • Double-Play  30%

          • Triple-Play  16%

    • Mergers & Acquisitions

      • For the past seven years, LG has focused on pursuing beneficial acquisitions.

        • Odakyu Telecommunication Services

        • Cablecom

        • IPS Multicanal

        • Austar


    Swot analysis

    SWOT Analysis


    Virgin media key facts

    Virgin Media Key Facts

    Revenue: $6.5 billion (in millions)

    Neil Berkett, CEO

    16.3

    83.7

    Headquarters: New York City, New York

    Employees: 12,000+

    Revenue: $6.5 billion dollars

    Customers: 5 million

    13 million homes passed

    12 million RGUs


    What about virgin media

    What About Virgin Media?

    • Virgin Media is a leading provider of entertainment and communication services in the United Kingdom.

    • Virgin operates in two segments...

      • Consumer: This segment includes our cable, internet and telephony services to our residential customers.

        • Accounts for 83.7% of revenue.

    • Business: This segment includes our cable, internet and telephony services to our business customers based upon their required needs.

      • Accounts for 16.3% of revenue.


    Swot analysis1

    SWOT Analysis


    Deal highlights

    Deal Highlights

    • 80% of the combined company’s revenue will be coming from just 5 of it’s markets.

      • United Kingdom

      • Germany

      • Belgium

      • Czech Republic

      • The Netherlands


    Industry outlook

    Industry Outlook

    Forecasted Annual Growth Until the Year 2016


    Vm lg vs the industry

    VM & LG vs. the Industry

    Virgin Media & Liberty Global Compared to the Industry


    Vm lg together

    VM & LG Together

    Combined Results


    Common size balance sheet

    Common Size Balance Sheet


    Works cited

    Works Cited

    Liberty Global 10K

    Virgin Media 10K

    Bloomberg Terminal

    www.WallStreetJournal.com

    www.OneSource.com

    www.IBISWorld.com

    www.MarketLine.com


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