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| Liberty Global’s $24.1 billion acquisition of Virgin Media | |
| Size | $24.1 billion |
| Date | June 2013 |
| Lead adviser Liberty Global | Lion Tree Advisors |
| Financial adviser to Liberty Global and sole global coordinator debt financing | Credit Suisse |
| Adviser Virgin Media | Goldman Sachs, JPMorgan |
| return to the Deals of the Year 2013 index | |
Last year was the most exciting that the M&A markets have seen for some time. A string of announcements early on in 2013 from such companies as Heinz, Dell and Liberty Global heralded a much-needed surge in confidence that was more than rewarded with the news towards the end of the year of Verizon’s record-breaking $130 billion buyout of its wireless business from Vodafone. Euromoney’s M&A deal for the year, which was announced in February and completed by June, is the $24 billion acquisition of Virgin Media by Liberty Global.
Virgin Media was always an attractive target for the acquisitive Liberty Global in light of the comparative advantage that scale brings in the cable broadcast industry – particularly in the negotiation of content pricing and provision of bundled services. The firm already had broadband networks in 13 countries, including Germany’s Kabel BW and Unitymedia, but with 4.85 million cable customers in the UK (and a gross profit margin of 60%) Virgin would enable Liberty Global to leapfrog Comcast and become the world’s largest broadband communications provider, covering 25 million customers in 47 million homes across 14 countries. The deal is the largest US outbound merger ever and is also the largest redomicile merger on record – under the terms of the deal Liberty Global became domiciled in the UK by becoming a subsidiary of a new UK PLC holding company. Eighty percent of its revenue after the merger will be from the European market.
The deal was negotiated at the tail end of 2012, with Liberty Global being advised by LionTree Advisors and Virgin by Goldman Sachs. It materialized as a stock and cash merger, with Liberty paying $47.87 per Virgin share, a premium of 24%. New Liberty Global Class A shares worth $86 million and $65 million of new Liberty Global Class C shares were issued, 36% of which are owned by Virgin shareholders, giving them 26% voting rights. The deal was backed by the issue of a £2.3 billion-equivalent four-tranche bond offering and a £2.3 billion-equivalent senior secured term loan B, with Credit Suisse acting as left lead on both.
Underwriting had to be in place by the time the deal was launched to cover change-of-control triggers on existing Virgin Media bonds. The bond was the largest cable high-yield bond financing in the history of the European market and the debt financing was at the time the largest acquisition financing globally since the financial crisis. The bond deal was executed in two days and the entire debt capital raise saw the issuer source $8 billion-equivalent from the market in just eight business days. “We received outstanding execution in a deal with many moving parts and under a compressed time frame,” said Charlie Bracken, chief financial officer at Liberty Global after the deal closed. “This transaction pushed all boundaries of what has been done since the crisis.”
