Virgin reportedly receives $11.35 bil offer


NEW YORK -- Virgin Media Inc. received a buyout offer worth as much as $11.35 billion, people familiar with the deal said on Monday, sending shares in the British telecommunications company to a new one-year high.

But, underscoring the delicate nature of the proposal, Virgin Media would not name its suitor and said the deal would be scrapped if it even disclosed the potential terms.

The offer of between $30 to $35 per share was made by the Carlyle Group, a Washington-based private-equity firm, according to people who spoke only on the condition that they not be identified because they were not authorized to do so publicly on the matter. Virgin also has roughly 6 billion pounds ($12.1 billion) of debt.

Virgin Media would say only that the offer came after it began a review with Goldman Sachs to explore "strategic alternatives," including a possible sale. Despite being formally based in New York and listed on the Nasdaq, the company's operations are in the U.K.

Virgin Media added that "there is no assurance that any transaction will occur or, if so, at what price." The company said it does not plan to comment further until a deal is reached or the offer is dropped.

Shares of Virgin Media jumped 18%, or $4.30, to $28.67 Monday.

The aggregation of cable operators NTL Inc. and Telewest and the mobile operator Virgin Mobile, the company reported its seventh consecutive quarterly loss in May after subscribers defected to rival satellite service BSkyB.

Thomas Eagan, a media analyst at Oppenheimer & Co., said going private could make Virgin Media more competitive. The company wouldn't have to publicly disclose its operating and financial figures, he said, and would be less constrained in terms of marketing, customer service and programming costs.

Other cable operators, such as Insight Communications Inc. and Cox Communications Inc. in the U.S., have gone private in recent years.

"Private equity has shown that it likes cable stocks," Eagan said. "Here's one that's trading at a pretty low multiple versus U.S. cable stocks with a high cash flow yield compared to U.S. cable stocks."

Virgin Media was formed to create Britain's first "quadruple play" service, offering mobile phone, fixed-line phone, Internet broadband and TV services. It has struggled, however, to provide solid services across all four platforms and recently invested substantially in revamping its customer service after scores of complaints.

Virgin Media stopped airing basic BSkyB channels, dropping popular American programs such as "Lost," "24," and "The Simpsons," as the result of a battle over fees during negotiations to renew a distribution agreement.

BSkyB has long dominated pay TV in Britain, accounting for around 70% of the country's pay-TV subscribers. But the arrival of Virgin Media has threatened a shake-up of the status quo, and relations between the two have become increasingly rancorous.

UBS said that a private equity approach for Virgin Media could result in a reduction of competitive pressure on BSkyB, which has a "triple play" service, offering high-speed Internet access, pay TV and landline telephone service.

"It could also result in a more pragmatic approach, with Sky and Virgin finally reaching an agreement on Sky basics which could be in the interests of both groups and Virgin Media customers," analysts said in a research note.

Entrepreneur Richard Branson is the largest shareholder in Virgin Media with a 10.5% stake. He also licenses the Virgin name to the company and gets paid for promotional appearances.