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May 21, 2007

Virgin Media Takeover Speculation Revived

As I noted last week, it seemed possible that Virgin Media (VMED) might be back in the crosshairs of private equity when one of its largest shareholders, Franklin Mutual Advisers, indicated that it wanted to meet with management and other shareholders regarding the poor performance of the company. My guess appears to have been accurate as the UK newspaper The Observer reported yesterday that Providence Equity is rekindling its interest in VMED and opening talks with potential partners. Approximately one year ago, private equity groups reportedly offered $31 to VMED and were turned down by a combination of Richard Branson and major shareholders who got their stock through the company's bankruptcy reorganization a few years ago. Those shareholders have been selling their positions and gave up a Board seat recently and might not be in a position to block a deal this time. As for Branson, it is unclear where he would stand. The reports of the new deal suggest a deal at very little premium to current prices but if the Board indicated it was willing to talk, I think a price close to $30 is still plausible despite the weak fundamentals. I am not long VMED and don’t recommend getting involved given the weak fundamentals but I expect the stock to move up nicely today.

Posted by Steve Birenberg at May 21, 2007 08:30 AM in NTLI