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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

Liberty Global – Virgin Media Merger Analysis

KrunalIntwala

Samantha Hess

Joe Cardoso

Anisha Gandhi

Michael Schneider

May 9th, 2013

Liberty Global & Virgin Media | May 9th , 2013 1

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 , 2013 2

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 , 2013 3

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
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
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.
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

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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