Liberty Global surprises with $ 7.4 billion deal to buy Sunrise in latest telecom consolidation

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ZURICH (Reuters) – Liberty Global LBTYA.O plans to take over the Swiss company Sunrise Communications SRCG.S in a $ 7.4 billion surprise deal announced by the companies on Wednesday.

FILE PHOTO: The logo of Swiss telecommunications company Sunrise can be seen at its headquarters in Opfikon, Switzerland, February 6, 2019. REUTERS / Arnd Wiegmann

The deal cancels Sunrise’s failed offer to buy Liberty’s Swiss operations last year and marks a strategic turnaround for the US company that divested of European assets.

The all-cash 6.8 billion Swiss francs ($ 7.43 billion) deal will see Liberty Global, set up by US cable pioneer John Malone, pay 110 francs a share for Switzerland’s second-largest telecommunications company , a premium of 32% over the average share price of the company. in the last 60 days.

Shares of Sunrise rose by more than a quarter to be just below the offer price in early trading on Wednesday.

Sunrise’s offer to buy Swiss cable company UPC from Liberty Global last year collapsed amid opposition from Sunrise’s largest shareholder, Germany’s Freenet FNTGn.DE and activist investors, including Axxion and AOC, who retreated from the price.

On Wednesday, Freenet, which owns 24% of Sunrise, pledged to tender its shares to Liberty Global’s offer.

“It’s a fair assessment,” Freenet CEO Christoph Vilanek told Reuters. “We think a merger on reasonable terms makes sense.”

The deal, which is subject to regulatory approval, is the latest sign of consolidation in the telecommunications industry as companies attempt to cut costs and increase investment in technology.

Liberty Global said it approached Sunrise in July with the proposed offer and got a positive response.

“I have always said that the market needs streamlining and we remain opportunistic about strategic developments there,” Liberty Global chief executive Mike Fries told reporters. “The industrial logic of this agreement is undeniable.

In Switzerland Sunrise and Liberty Global crisscross the state-controlled Swisscom SCMN.S, the leading provider of Internet, mobile phone and cable TV services.

Together, the combined company is said to have a turnover of 3.17 billion Swiss francs, 2.1 million mobile subscribers, 1.2 million broadband subscribers and 1.3 million internet subscribers. television, which represents about 30% of the market share in each segment, Liberty Global said.

PUT CAPITAL TO WORK

Liberty had divested itself of European assets, considering that the sector is expensive given its high investment costs and poor growth prospects.

The biggest deal, the sale of its cable networks in Germany and central Europe to Vodafone, brought in $ 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.

In Belgium it bought a mobile operator, while in the Netherlands and the UK it was setting up joint ventures, he said.

Liberty’s buyout of Sunrise follows the £ 24 billion ($ 31.32 billion) merger between Liberty Global’s Virgin Media and Telefonica’s O2 and the takeover of Spain’s Masmovil by private investors.

Fries said Liberty Global wanted to use its strong balance sheet.

“We’re sitting on $ 10 billion in cash right now,” he said. “We felt this was a great market and a great opportunity to put capital to work. “

Credit Suisse, JP Morgan and LionTree acted as financial advisers 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.

Reporting by John Revill; Additional reporting by Douglas Busvine in Berlin; Editing by Susan Fenton


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