VIRGIN Media, the cable television and telecoms firm, confirmed yesterday that it was in early stage talks that could see it swallowed by one of Rupert Murdoch’s fiercest rivals.
Shares in the group soared more than 17 per cent after Virgin Media said it was in discussions that could lead to a bid from John Malone’s Liberty Global, which operates across 13 countries, including 11 in Europe.
Virgin Media is the UK’s second-largest subscription television provider behind satellite broadcaster BSkyB, of which Murdoch’s News Corporation owns 39 per cent, and has a valuation including debt of more than £13 billion.
In a brief statement, the firm said: “Virgin Media confirms that it is in discussions with Liberty Global, a leading international cable company, concerning a possible transaction. Any such transaction would be subject to regulatory and other conditions.”
Shares in the group closed up 426p, or 17.3 per cent, at 2,889p.
Virgin Media, which has returned more than £1bn to investors since it launched a share buyback scheme in 2010 and recently unveiled plans to return a similar sum by the end of next year, posts its full-year results today.
The group is listed in New York, with a secondary listing on the London market. It has a market value of more than £7.7bn and its net debt pile stood at almost £5.7bn at 30 September.
Virgin has almost five million cable customers, compared with 10.7 million subscribers at BSkyB and 19.6 million at Liberty Global, where Malone has been chairman since 2005.
Malone also chairs Liberty Media, which went head-to-head against Murdoch’s News Corp a decade ago when the two groups vied for control of DirecTV Group, the largest US satellite broadcaster. The stand-off ended when Malone swapped Liberty’s stake in News Corp for its interest in DirecTV.
Along with its broadcast interests and small stakes in Time Warner and MTV-owner Viacom, Liberty Media owns the Atlanta Braves baseball team and a 17 per cent interest in book retailer Barnes & Noble.
News Corp had tried to seize full control of BSkyB last year but dropped the plans under intense political pressure following the phone-hacking scandal that led to the closure of the News of the World in 2011.
Malone, who has previously said he would like to enter the UK market, surprised the City when he did not bid for a stake in BSkyB. Liberty had owned a 25 per cent stake in Telewest, which merged with rival cable firm NTL and then mobile phone operator Virgin Mobile to create Virgin Media in 2006.
Sir Richard Branson’s Virgin Group retains a stake of about 3 per cent in the media and telecoms firm, which spent the first few years of its existence engaged in a battle with BSkyB over access to content. Chief executive Neil Berkett has overseen its recent growth by focusing on the roll-out of faster broadband internet services.
Liberty generates the bulk of its revenues from Europe, where its UPC broadband and digital television brand stretches from Ireland to Romania.
Russell Holden, a partner at law firm Taylor Wessing, said the strategic rationale of any deal would be “hard to see given cable networks have few cross-border synergies and the cable market in different jurisdictions can be quite disparate”.