British cable and broadband company Virgin Media may be looking to Liberty Global Inc. as a potential buyer.
Virgin, which offers cable TV, Internet, home phone and mobile service in the United Kingdom, put itself on the auction block this year after receiving a private-equity offer from The Carlyle Group. It is asking for offers from more than 10 private equity firms and cable companies before Aug. 8.
Douglas County-based Liberty Global, which operates cable systems in Europe, Japan and South America, is mulling whether to place a bid for Virgin. Liberty Global has operations in Ireland.
“We’ve been contacted by the bankers that Virgin hired,” said Liberty Global spokesman Rick Westerman. “At this point, we haven’t received any material. It’s too preliminary.”
Liberty Global was formed in 2005, the result of the combination of Liberty Media International and UnitedGlobalCom. Liberty Global is the largest cable operator outside of the U.S. and the sixth-largest company in Colorado, valued at $15.4 billion. U.S. cable magnate John Malone is chairman of Liberty Global and Liberty Media Corp.
Bidding on Virgin would go against the grain of Liberty Global’s main strategy of investing in cable markets that have a huge opportunity for growth, particularly in Eastern Europe. The company seeks to be the No. 1 or No. 2 pay TV provider in its region, and Virgin Media competes in a sophisticated and saturated market dominated by Rupert Murdoch’s BSkyB Ltd. satellite TV empire.
“We have, in general, pursued much higher growth markets,” Westerman said. “The U.K. is a challenging environment because of the strength of Sky.”
Anyone looking at acquiring Virgin will have to contend with BSkyB, “The Death Star,” said Greg Kolb, research analyst for Janco Partners.
“Competing with The Death Star is a very difficult task,” he said. “They (Virgin officials) really need to carry Sky’s programming.”
Kolb said that it’s “not overly surprising” that Malone is taking a look at Virgin Media, as it’s one of the biggest cable deals taking place outside of the U.S.
Among the benefits that Virgin could see if it is acquired by the much larger Liberty are price discounts from manufacturers of set-top boxes and the use of Liberty’s billing systems, Kolb said. Virgin has 3.39 million TV subscribers.
However, the price would have to be right for Liberty, Kolb said, much lower than the $32 to $33 per share proposal from Carlyle.
“They could maybe do something at the right price,” Kolb said. “They’re pretty financially creative.”
Philadelphia-based Comcast Corp. also may be part of a bid for Virgin, according to reports in a British financial newspaper. Stephen Burch, Virgin’s chief executive, worked for Comcast for 17 years.
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
