TPG mulls £11bn Virgin Media bid(2)

US buyout firm TPG is considering a bid for cable broadband company Virgin Media. It is also lining up its first Russian deal.

US buyout firm TPG is considering whether to join the £11 billion ($22 billion, €16 billion) auction for Virgin Media, a UK cable broadband company, according to a banking source.

The process is expected to be a competitive one. The Carlyle Group is preparing a bid at around $32.00 per share, according to another banker. As well as paying an equity price of around £5 million, Carlyle – or any other bidder – would need to take on Virgin Media’s £6 billion of debt.  As a result the deal is expected to have an enterprise value of about £11 billion.

The UK-based Times newspaper reports that a consortium including Providence Equity Partners and Kohlberg Kravis Roberts is also mulling a bid. The same two buyout firms, along with Cinven and The Blackstone Group, tried to take Virgin Media private for £10 billion in 2006 but were blocked by hedge fund tycoon Bill Huff, then a major shareholder in the business. Huff has since decreased his stake and is no longer considered an obstacle to a potential takeover.

However, media reports suggest that some of the bidding groups have asked Virgin Media to delay the auction due to problems in the credit markets.

Separately, market sources played down claims that TPG had agreed its first investment in Russia. Russian newspaper Kommersant reported that the firm was in advanced talks to acquire a 50 percent stake in Russian company JSC 7K Investholding for around $1.1 billion (€1.6 billion, $2.2 billion). The company owns a 74.8 pct stake in Seventh Continent, Russia’s sixth largest retailer. The paper said talks began half a year ago and the two companies expect to sign an agreement by September 3.

However, a Russian market source said the details were untrue. “This is a common tactic in Russia where companies put out a story with figures in an attempt to flush out other bidders. TPG is looking at the company but it is also considering seven or eight other companies,” he said.