The protracted acquisition of Virgin Mobile Plc, the UK’s fifth largest mobile operator, looks to be back on the cards after reports that its board is ready to accept an improved offer by UK cable giant NTL Inc.
NTL’s pursuit of Virgin Mobile began back in early December last year when NTL offered 323 pence ($5.61) in cash for each Virgin Mobile share, a 3.9% premium on Virgin Mobile’s closing price the day before the deal was announced. At that time, the offer was strongly backed by Virgin Mobile’s largest shareholder, the British entrepreneur Sir Richard Branson who has a 72% stake in the operator.
However, the small premium did not impress Virgin’s minority shareholders who between them control 28.5% of the operator, and a week later the offer was firmly rejected. The minority shareholders include Fidelity, Morley Asset Management, Deutsche Asset Management, and boutique fund manager Aberforth Partners.
Takeover talks restarted in January, and now it seems that Virgin’s minority shareholders are prepared to accept a revised offer from NTL for 372p ($6.49) per share in cash, valuing the deal at roughly 900m pounds ($1.57bn).
It is thought that Sir Richard Branson will take 340p ($5.93) a share in cash, plus a shareholding in NTL. It is unclear at this time how much of NTL he would own, however previous figures mentioned a 14% stake in NTL, which would make him its largest shareholder, as well as possibly having a seat on the NTL board.
It is not hard to see why Virgin Mobile is so desirable to NTL. It has an incredibly strong brand name, and it is also recognized as having excellent customer service. These two points have been well-known problem areas for NTL for years now. Part of the deal will include the licensing of the Virgin brand from Branson, which could allow NTL to rebrand and reinvent itself as a quad-play service provider offering mobile phone, fixed-line, pay TV, and internet access.
NTL is currently closing the $6bn acquisition of cable rival Telewest Global Inc, and there have been concerns voiced that it was stretching itself financially with this new deal. However, with the emerging importance of triple-play and the digital home in the UK market, NTL’s decision to go after Virgin Mobile received a positive reaction from the City.
According the Financial Times, an announcement of a deal should be expected towards the end of this week, or early next week.
The newspaper also reports that Virgin Mobile’s chief executive, Tom Alexander, has agreed to remain in charge if and when it is taken over. It is thought that NTL is keen to retain Virgin’s management to run the unit as a separate entity in the enlarged group.