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O2/Virgin Media gets commitment for £4 billion financing with merger
By Sara Rosenberg
New York, May 7 – O2 and Virgin Media announced plans to merge and, as part of the transaction, a syndicate of banks has underwritten a £4 billion stand-alone undrawn financing on the O2 business, according to a news release.
Telefonica SA, the current owner of O2, and Liberty Global plc, the current owner of Virgin Media, are merging these operating businesses in the U.K. to form a 50:50 joint venture. The combination of O2 and Virgin Media will create an integrated communications provider with £11 billion of revenue.
The transaction will include a series of recapitalization financings prior to closing to reach a target closing net leverage ratio for the joint venture of 5x, or about £18 billion of long-term debt. Net new proceeds from the recapitalizations are targeted to be around £6 billion.
After taking into account the recapitalizations, Telefonica is expected to receive £5.7 billion in total proceeds from the transaction and Liberty Global is expected to receive £1.4 billion in total, including approximately £800 million from the recapitalization of its retained and 100% owned Virgin Media Ireland business.
The transaction will not trigger a change of control under Virgin Media’s existing £11.3 billion of net debt and debt-like items that will be contributed in full to the joint venture.
Closing is expected around the middle of 2021, subject to regulatory approvals, consummation of the recapitalizations and other customary conditions.
JPMorgan and LionTree Advisors are acting as financial advisers to Liberty Global. Citigroup is acting as financial adviser to Telefonica.
O2 is a Slough, England-based mobile platform. Virgin Media is an England-based broadband provider.
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