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Liberty Global plans to take over Switzerland’s Sunrise Communications in a $ 7.4 billion surprise deal announced by the companies on Wednesday.
The agreed deal reverses Sunrise’s failed bid to buy Liberty’s Swiss company last year and marks a strategic reversal by the US company that has split European assets.
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The all-cash 6.8 billion Swiss franc ($ 7.43 billion) deal will see Liberty Global, set up by American cable pioneer John Malone, pay 110 francs per share for Switzerland’s No. 2 telecom company, a premium of 32% for the average share price of the company over the past 60 days.
Sunrise shares rose more than a quarter to just below the offer price in early trading on Wednesday.
Sunrise’s bid to buy Liberty Global’s Swiss cable company UPC plummeted last year in the face of opposition from Sunrise’s largest shareholder, Freenet of Germany and activist investors, including Axxion and AOC, who are shaking the price.
On Wednesday, Freenet, which owns 24% of Sunrise, announced its stake in Liberty Global’s bid.
“It’s an honest rating,” Freenet CEO Christoph Vilanek told Reuters. “We believe that a merger on sensible terms makes sense.”
The deal, which is subject to regulatory approval, is the latest sign of consolidation in the telecom industry as companies try to cut costs and increase investment in technology.
Liberty Global said it approached Sunrise in July with the proposed offer and received a positive response.
“I have always said that the market requires rationalization and we remain opportunistic about strategic developments there,” Liberty Global Chief Executive Mike Mike told reporters. “The industrial logic of this deal is beyond doubt.”
In Switzerland, Sunrise and Liberty Global are run by state-controlled Swisscom, the dominant provider of Internet, mobile phone and cable TV services.
Together, the combined company would have 3.17 billion Swiss francs in revenue, 2.1 million mobile subscribers, 1.2 million broadband subscribers and 1.3 million TV subscribers, reflecting about 30% market share in each segment, Liberty said. Global.
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Liberty had divested European assets with the view that the sector is expensive in light of its high capital costs and low growth prospects.
The biggest deal, the sale of its cable networks in Germany and Central Europe to Vodafone, grossed $ 22 billion last year.
Fries said Liberty Global had withdrawn from Austria and Germany because its operations there lacked scale, while elsewhere it sought to expand its footprint.
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In Belgium, it bought a mobile operator, while in the Netherlands and the United Kingdom it was joint ventures, he said.
Sunrise’s takeover follows the £ 24 billion ($ 31.32 billion) bond between Liberty Global’s Virgin Media and Telefonica’s O2 and the acquisition of Masmovil from Spain by private investors.
Fries said Liberty Global wanted to use its strong balance sheet.
“We are currently sitting on $ 10 billion in liquidity,” he said. “We found this to be a great market and a great opportunity to put capital to work.”
Credit Suisse, JP Morgan and LionTree acted as financial advisors to Liberty Global, while Homburger and Shearman & Sterling provided legal advice.
Deutsche Bank acted as financial advisor and Lenz & Staehelin as legal advisor to Sunrise.
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($ 1 = 0.9157 Swiss francs) ($ 1 = 0.7664 pounds)
(Report by John Revill; Additonal Report by Douglas Busvine in Berlin; Edited by Susan Fenton)
