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Liberty Global to buy Virgin Media

Wednesday, February 06 09:29:35

John Malone's Liberty Global has struck a deal to buy British cable group Virgin Media for about $15.75 billion in stock and cash. The move will put the US billionaire up against old rival Rupert Murdoch again.

The companies announced the deal in a statement late last night, after Virgin Media, the second-biggest pay-TV provider in Britain behind Murdoch's satellite group BSkyB, confirmed Liberty's approach earlier in the day. Including debt, the deal would be worth more than $23 billion and would give Liberty entry to one of Europe's biggest and most competitive telecom markets. It would allow it to apply lessons learned as a pay-TV and broadband provider in 11 other European countries. It would also put Malone's Liberty in a strong position to challenge Murdoch as cable groups across the region start to assert their authority over traditional telecoms firms with the offer of super-fast broadband and pay-television. Liberty will pay about $47.02 for each Virgin Media share based on yesterday's closing prices, using cash and shares of its class A and C stock.

Malone, whose group has 19.6 million customers, came up against Murdoch a decade ago when Murdoch's News Corp and Liberty Media vied for control of DirecTV Group, the largest US satellite TV broadcaster. The stand-off ended when both sides backed down. News Corp sold its one-third stake in DirecTV to Malone's group and Malone sold 16pc of News Corp that Liberty had acquired, giving the Murdochs fuller control over their company. Malone made his fortune through a series of deals that transformed, and ultimately consolidated, the US cable industry into one dominated by a few big players. Murdoch's BSkyB leads the British pay-TV market with 10.7 million customers compared with Virgin Media's 4.9 million.

Virgin Media emerged two years ago from years of heavy losses from a costly network expansion. But its cables still only cover half of Britain and analysts see potential for more growth. The approach for Virgin Media follows a period of stabilisation engineered by chief executive Neil Berkett after a debt restructuring. Virgin Media was formed by the merger of cable groups Telewest and NTL and mobile operator Virgin Mobile in 2006 to huge fanfare led by major shareholder Richard Branson, who still owns around 3pc of the group.