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Last Updated: Tuesday, 3 July 2007, 00:23 GMT 01:23 UK
Equity firm targets Virgin Media
Robert Peston
By Robert Peston
Business Editor, BBC News

Model Dita Von-Teese launching Virgin Media
Virgin Media has been involved in a bitter dispute with Sky
Virgin Media, the UK's leading cable television company, could be taken private for more than 5.5bn.

Carlyle, one of the world's biggest private equity groups, has made a preliminary offer of between $33 (16.50) and $35 per share for Virgin.

Virgin shares, which are listed on the US Nasdaq rather than in London, at one point, jumped 23.10% to $30 per share.

Sir Richard Branson's group confirmed it had received a takeover proposal, which it said it would consider.

But Virgin Media did not identify the bidder, believed to be Carlyle, in its statement and also said it had not engaged in negotiations with the suitor.

Subject to conditions

"The proposal is based on public information and is subject to various conditions, including a due diligence examination and a period of exclusivity," the company, which was created by the merger of NTL, Telewest and Virgin's mobile phone operations earlier this year, added.

Virgin Media said it had asked its investment bankers, Goldman Sachs, to conduct a "strategic review" of the company prior to the receipt of the offer, which could be withdrawn if its terms are publicly disclosed.

"The proposal will be considered as part of the review," it said, but added: "There is no assurance that any transaction will occur or, if so, at what price."

Sir Richard Branson is the largest investor in Virgin Media, which has 9 million customers and a 4bn annual turnover.

If successful, the merger would value Virgin at approximately 5.6bn.

The total value of the takeover deal, including Virgin's debt of almost 6bn, would be about 11.5bn.

If it goes through, it would be the second biggest takeover of a British business by private equity, after Boots.

Auction plans

However, it is too early to say whether Carlyle will end up as the owner of Virgin Media, since other private equity firms are interested in making their own offers for it.

It is believed Virgin's managers feel the business would be in a better position to grow as a private company.

BBC business editor Robert Peston
The tidal wave of private-equity takeovers shows no sign of abating
Robert Peston,
BBC business editor

They would be freed from the onerous requirement to make quarterly announcements of earnings and could be less fettered in the way they invest in the business.

Providence, another private equity group, is believed to have put together a consortium of private equity players to make an offer for Virgin.

A banker said there was likely to be interest in Virgin from "several other private equity groups".

Sources close to Sir Richard Branson say he would like to remain a shareholder in Virgin if it were to be taken private.

It is believed that most of the other leading Virgin shareholders would be keen to sell at somewhere around the price offered by Carlyle, although the Virgin board believes the business could be worth up to $40 a share.

Legal dispute

In May, following pressure from leading shareholders, Virgin asked Goldman to carry out detailed research on what the business is worth - known as a valuation exercise.

Virgin is in a bitter legal dispute with British Sky Broadcasting following the failure of the two businesses to reach an agreement on terms for Sky to be carried on Virgin's cable channels.

In its last results, Virgin said it had three million users of its television services, 3.4 million broadband customers, 4.5 million subscribers to its mobile phone service and 4.1 million fixed-line telephone customers.

It is believed that Goldman will take around six weeks to whittle down the actual and potential bidders for Virgin to a definitive short list.

Shares in Virgin closed up 17.64% at $28.67 at the end of the trading day in New York.

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