What Credit Crunch--Liberty Media Bidding For Virgin Media?
Despite all the concern about the credit crunch, a big private equity deal seems to be moving forward. On Monday, John Malone, Chairman of Liberty Media tells the Financial Times he's considering enterting the auction for Richard Branson's Virgin Media . This could be a huge deal--the largest cable transaction outside the U.S.
To give a sense of scale: The Carlyle Grouphas made a bid for Virgin Media worth some $23 billion dollars, and some other private equity players have also bid. One upshot of the credit crunch--private equity may not want to go forward with their bids, and Liberty may have a better shot.
That's not to say that Liberty will go it alone--Malone could partner with Carlyle or one of the other PE players. Or, Malone could keep Branson in the game, and Branson would likely keep some sort of equity holding in the company.
So why does Malone want this Virgin territory? For one, Malone knows cable better than almost anyone else and this would give him a huge presence in Europe, plus the ability to find some synergies with Liberty's existing properties. Then there's the fact that Virgin has about $24 billion dollars of accumulated losses--which is a good thing. It means that when Virgin turns profitable, those losses could potentially be used to offset taxes of future profit.
Then there's the little issue of Rupert Murdoch and his powerfulB-Sky-Bcompetitor to Virgin. Some analysts, including Lehman Brothers, say Liberty doesn't want to face off with Murdoch-- it's just too tough to win. But other Liberty watchers say it's a pretty sure thing that Malone will make the bid. Media Tech Capital Partners Porter Bibb told me that he thinks there's an 80% to 90% chance Malone will make the bid, and that in fact, he's not afraid of Murdoch.
Bibb pointed out that he knows Murdoch's dealings better than almost anyone, because until trading his NewsCorp holdings for DirecTV, Malone's Liberty was a big NewsCorp Shareholder. That's the kind of competition that would surely shake up the market, were the deal to go through. Will it go through? Branson surely wants to drum up a bidding war, but considering the credit crunch, we'll see how it plays out.
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