Virgin mum on takeover offer

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LONDON -- Virgin Media on Monday said it has received a takeover offer, but declined to confirm if it was in discussions with either private equity buyers the Carlyle Group or a separate consortium believed to be led by Providence Equity Partners.

Virgin Media is thought to have received a completed buyout offer from Carlyle, but a second bid from Providence Equity Partners is also thought to be in the wings, opening up the prospect of an auction.

Under London-based partner John C. Hahn, Providence has been quietly acquiring a slew of European cable and satellite assets over the last few years including leading German cable group Kabel Deutschland, Turkish digital TV operator Digiturk and Swedish broadband provider Com Hem.

Providence also counts former BSkyB chief executive Tony Ball, currently executive chairman of Kabel Deutschland, as a key advisor.

Shares in the ailing cable company, which rebuffed a Providence-led bid offering $32 a share last year, have since struggled, but soared 14% to $27.78 on the Nasdaq in early trading Monday.

Virgin said it had "received a proposal to acquire 100% of the common stock of the company" but had not engaged in formal talks with the undisclosed bidder.

"The company has not engaged in negotiations with the offeror. The proposal is based on public information and is subject to various conditions, including a due diligence examination and a period of exclusivity," the company said in a statement.

The proposal also states that it will be withdrawn if its terms are publicly disclosed.

Virgin Media said that, prior to receiving the bid, it had hired Goldman Sachs to conduct a strategic review of the business including a possible sale option.

"The proposal will be considered as part of the review. However, there is no assurance that any transaction will occur or, if so, at what price. The company does not intend to comment further on the process unless and until a definitive agreement is executed or the process is abandoned," Virgin added.

Despite Virgin's ailing performance -- the company has been losing subscribers and, in May, announced the seventh successive quarter of widened losses -- the price tag for the cable television, telephony, Internet and mobile "quad-play" business could be as much as $22 billion, which would include debt of $12 billion.

The deal values Virgin Media at close to £2,500 ($5,040) per subscriber, non-inclusive of debt, according to analysts, who said management and investors were more likely to look favorably on buyout options.

"After rebuffing a bid approach last year, the board is thought to be more inclined to consider an approach after the loss of further market share and recent shareholder concerns regarding Virgin's strategy," UBS media analyst Daniel Kerven said.

A deal could also lead to an end to hostilities with pay TV rival BSkyB, which has proved damaging to customer numbers. Virgin's churn rates rose earlier this year after it stopped showing several Sky channels that carried such shows as "Lost" and "24."

"Private equity ownership could result in a change of strategy with reduced investment and less competition for Sky," Kerven said. "It could also lead to a more pragmatic approach with Sky and Virgin finally reaching an agreement."

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