As we loudly proclaimed last week, the existing bid by the Carlyle Group, grossly undervalued Virgin Media, and another was bound to follow. Every other news service this week is now hinting that the private equity consortium that bid this time last year, led by Providence and with involvement probably expected from its last time partners, KKR and Blackstone.
If that’s true, and we felt that leading shareholder Richard Branson and the Virgin advisors would have been mad not to ‘invite’ them to counter bid, then Carlyle is likely out of it, known for underbidding and only winning deals of late when no-one else sees the benefit of bidding.
The deal values Virgin Media at virtually the same price it was at prior to buying the UK arm of Virgin Mobile and setting up the UK’s first genuine quadruple play, around $23 billion including debt. If the terms on last year’s bid are repeated it should see off Carlyle or make it raise its bid. Newspaper reports say that all first round bids will be in this month, and a set of second round bids is being arranged for late August.
We would be unsurprised if advisor UBS said that neither bid was high enough and told the board to sit tight for a while. Virgin Media is certainly viable as it is, despite a very public war with BSkyB over the costs of certain channel rights, which is what has investors on the run, instigating these talks.