Virgin Media “in discussions” with Liberty Global over potential “transaction”

Virgin Media confirmed today that it is in talks with global US-based cable powerhouse, Liberty Global, for a potential acquisition. This would see the only remaining all-cable operator in the UK become part of the UPC network (otherwise known as Liberty Global Corporate).

Liberty is present in 11 European countries but not in two of the biggest markets, UK and France. It has 21,000 employees and had revenues of $10.1 billion in 2012. Virgin Media, in comparison, is expected to reach £4 billion (around $6.5 billion) annual revenue in 2012 with more than 11,000 employees.

Adrian Drury, principal analyst at Ovum, said in a statement that “While Liberty’s play for Virgin is likely to be driven by its long term vision for the value a foothold in the UK will have a pan European triple-play business, and the competitive need to fight News Corp at this scale, in the near term it will make the UK the ring for a straight slug fest between two global pay-TV heavyweights, John Malone and Rupert Murdoch, as they battle for UK fixed broadband, fixed voice and pay-TV subscribers. Depending on how Malone might chose to leverage the Virgin Mobile asset, it may also spill over in consumer mobile services.”

The market reacted very positively with Virgin Media shares jumping by 16 per cent to reach $45.00 at the time of writing, pushing the company’s market capitalization to $12.11 billion. In comparison, shares of Liberty Global are currently trading with a 4.24 discount which puts the price of the company at $17.48 billion.