Carlyle Group planning to acquire Virgin Media

BY A CORRESPONDENT

3 July, 2007:

Private equity firm Carlyle Group is planning to acquire British cable television company Virgin Media.

Apparently, the Carlyle Group has offered Virgin Media around $20 billion (£9.95 billion). The Carlyle Group is in the early stages of talks with Virgin Media regarding the acquisition, the New York Times and Washington Post have reported.

Carlyle’s initial offer is said to have been between $30 and $35 per share, valuing Virgin Media at a minimum of around $10 billion (£5 billion), according to reports in the British media. However, this valuation excludes Virgin Media’s debt.

The Carlyle Group will have to negotiate with Sir Richard Branson, Virgin Media’s largest shareholder having a 10.5% stake for its bid to succeed. Sir Richard reportedly wants to retain a stake in the business.

Virgin Media, which has 9 million customers and a £4-billion annual turnover, has asked its investment bankers, Goldman Sachs, to conduct an auction of the business.

Incidentally, Virgin Media is locked in a bitter fight with BSkyB after the latter failed to agree to a price for Sky channels to appear on Virgin’s cable service. Virgin Media is taking BSkyB to court.

Virgin Media, formed by a merger in 2007 between Virgin Mobile and cable operator NTL Incorporated, reported its seventh consecutive quarterly loss in May 2007 after subscribers defected to rival BSkyB.

Virgin Media lost customers earlier in 2007 after it stopped airing basic BSkyB channels, dropping popular programs such as Lost, 24, and The Simpsons, as a result of a battle over fees during negotiations to renew a distribution agreement.

BSkyB has long dominated the pay television sector in the United Kingdom, accounting for nearly 70% of the country’s pay- television subscribers. But the arrival of Virgin Media has threatened a change in the status quo, and relations between the two have become increasingly bitter in recent months.

Meanwhile, buyout firms in America have of late become more aggressive, looking for targets beyond the United States. On June 30, 2007, two American private equity firms partnered with the Ontario Teachers Pension Plan to win Bell Canada, Canada’s largest telephone company.

Earlier in 2007, several private equity firms banded together to make a $20.1-billion offer for J Sainsbury, Britain’s third-largest grocery chain, but those firms eventually dropped out after the founding Sainsbury family demanded more money.