Malone strikes again with O2 and Virgin in €36bn UK merger
Spanish telecoms giant Telefonica and Liberty Global have agreed to create the UK’s largest phone and internet operator, threatening rivals and marking another industry-defining deal for billionaire John Malone.
The deal values the combination of Telefonica’s O2 with Liberty’s Virgin Media at £31.4bn (€35.9bn).
The companies said they plan a joint venture with equal stakes which will account for Virgin’s higher value and debt load with a payment to O 2.
The transaction is a chance for both parent companies to rework two mid-tier rivals into a fully-fledged competitor to BT Group in so-called converged services, which combine fixed and wireless phone, broadband and television.
Telefonica’s shares rose as much as 4.4pc as the announcement overshadowed mixed earnings before swinging to a loss, while BT revealed it is cancelling its dividend payments until 2021, causing shares to fall more than 11pc.
The transaction values O2 at £12.7bn (€14.5bn) and Virgin at about £18.7bn (€21.3bn). The Spanish parent has been weighed down by about €38bn of borrowing. The arrival of new funds, including a £2.5bn (€2.8bn) equalisation payment, could give its deleveraging efforts a boost.
Each company will name half of the eight-member board, which will have a chairman rotating every two years.
The announcement is the latest deal for Malone, Liberty’s billionaire chairman, who has been on a relentless mergers and acquisitions spree since selling cable provider Tele-Communications to AT&T for $48bn (€44.4bn) in 1999.
Deal values O2 at £12.7bn and Virgin at £18.7bn