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Virgin Media (LSE:VMED) shares advanced by 16.48% to 2869.00 by early afternoon after the company confirmed that it is in discussions with Liberty Global (NASDAQ:LBTYA) “concerning a possible transaction.” It was a 406.00 pence increase.
Whilst Virgin’s announcement was short and sweet, “Virgin Media confirms that it is in discussions with Liberty Global, Inc., a leading international cable company, concerning a possible transaction. Any such transaction would be subject to regulatory and other conditions,” the announcement by the Dow Jones News service and the Wall Street Journal offered much more insight.
Actually, the concept of Liberty Global in acquisition talks with Virgin is interesting food for thought, regardless of its impact on either company’s share price at the moment. Liberty’s chairman, John Malone has been both business partner and rival with Rupert Murdoch. In fact, Liberty Media was a 16% stakeholder in News Corp prior to 2008. That year Liberty exchanged its stake for the 41% stake that News Corp had held in DirecTV.
Charles Stanley media analyst Sam Hart described the power of a potential link up of Virgin and Liberty as a “stronger competitive threat” to Murdoch’s BSkyB, which he also described as being “leaps ahead of the competition.” In addition to the competition that Malone would give Murdoch, the talks with Virgin are part of Malone’s overall plan to expand its European base under the UPC brand which already includes Germany, Belgium, Switzerland, Austria, Hungary,the Netherlands, Poland, Romania, the Czech Republic, Ireland and Slovakia. The influence of Liberty would greatly enhance the capability of Virgin to become a dominant competitor to BSkyB whilst increasing its own European presence where it would also give Murdoch’s holdings a go competing for its 19 million current customers.
Over the last year, Liberty Global has been the most active acquirer of television companies. It has been involved in eight deals worth a total of $1.1 billion USD. Depending on the substance of the potential, it is possible on the downside, that the deal could put Liberty in a tighter cash position than they wish to be in.
Rumors of a potential transaction have persisted through hot and cold periods for more than five years, but this time the Virgin admission of active talks may signal something with the potential of consummation.
Lest the idea of a deal the puts Malone and Murdoch back into serious competition carry a hint of animosity, Malone was the gentlemen, declaring that “In all the transactions we have done with him, he has had the greatest integrity. I am not about to jump up and give him a hard time.”
Virgin is slated to publish its 2012 results tomorrow, 6 February 2013. What happens after that is anyone’s guess, but it sure is fun guessing.
