Liberty Global made an attempt to acquire Swiss operator Sunrise for CHF6.8 billion ($7.4 billion), nine months after a controversial deal to sell the former’s local assets to the mobile operator fell apart.
Having gained the backing of the Sunrise board, Liberty Global plans to launch a public tender offer of CHF110 per share by the end of August. Sunrise’s largest shareholder Freenet, which holds a 24 per cent stake, already signed a binding offer to sell its shares.
The acquisition will be funded by CHF3.5 billion of Liberty Global’s existing cash with the remainder from raising new debt. For the deal to go ahead on the outlined terms, the company must secure at least two-thirds of Sunrise shares from the tender. At that point the deal will go to Swiss regulators for approval.
Liberty Global runs fixed broadband and broadcast provider UPC Switzerland and, in a statement, said it aimed to create the leading converged player in the country with the acquisition of Sunrise.
The combined business would have a base of 2.1 million contract mobile subscribers, 1.2 million fixed broadband and 1.3 million TV customers, figures it noted gave it a 30 per cent share in each segment.
It also expects the deal to up its challenge to incumbent Swisscom in the B2B sector.
“The industrial logic of this merger is undeniable,” Liberty Global CEO Mike Fries said. “Fixed-mobile convergence is the future of the telecom sector in Europe, and now Switzerland will have a true national challenger to drive competition and innovation for years to come.”
“This transaction is another significant step on our path to create fixed-mobile champions in all of our core markets, crystallising the value of our superior broadband networks and driving long-term, sustainable free cash flow growth.”
CCS Insight director for consumer and connectivity Kester Mann noted the deal would “finally create a creditable converged rival to market-leader Swisscom, which has long dominated the Swiss telecoms landscape.” But he warned a reduction in “the number of players on the market could trigger some concerns around pricing and competition”.
The move comes three months after Liberty Global struck a deal with Telefonica [1] to merge its UK cable operation Virgin Media with O2 UK.
Controversy
In November 2019, Sunrise walked away from a CHF6.3 billion [2] acquisition bid for UPC Switzerland under pressure from shareholders. [3] The most vocal was Freenet, which had threatened to scupper the deal at an EGM.
Terminating from the agreement cost Sunrise CHF50 million in compensation and additional costs estimated at the time at up to CHF75 million.
Having defended the agreement throughout, Sunrise faced an exodus of senior executives [4] at the start of 2020, including CEO Olaf Swantee.
[1] https://www.mobileworldlive.com/featured-content/home-banner/telefonica-liberty-global-agree-massive-uk-merger
[2] https://www.mobileworldlive.com/featured-content/top-three/sunrise-scraps-controversial-cable-deal
[3] https://www.mobileworldlive.com/featured-content/home-banner/sunrise-at-war-with-top-shareholder-over-cable-deal
[4] https://www.mobileworldlive.com/featured-content/top-three/swantee-quits-sunrise-in-wake-of-failed-cable-deal
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