Branson plays decisive role in NTL’s fate

The buy-out team that has made a more than £10bn ($18.9bn) approach to NTL’s management has yet to secure the backing of Sir Richard Branson, the cable group’s largest shareholder, who has positioned himself to play a central role in the outcome of any bid.

A spokesman for Sir Richard’s Virgin Group would only say: “We have been shareholders in this business for a month and we have not had any approaches.”

Sir Richard acquired a 10.5 per cent stake in NTL when he sold Virgin Mobile to the group in a £961m deal that was completed in July.

Contracts signed between Sir Richard and NTL at the time mean that he can vote his shares against any change of control, even if it is recommended by the rest of NTL’s board, where Virgin has one director. However, he cannot assist a bidder by offering his shares for a deal opposed by the board.

The four-firm private equity consortium is led by Providence Equity Partners and includes Blackstone, Kohlberg Kravis Roberts and Cinven.

They are understood to have made an approach to senior executives of NTL shortly after the group’s second-quarter results this month. The first results since NTL completed its merger with UK rival Telewest disappointed many investors as they showed that intense competition in the broadband market was luring customers away.

It was unclear on Thursday whether a planned meeting between members of the consortium and NTL executives had been derailed, after news of the buy-out team’s intentions broke on Wednesday. RiverSource Investments, NTL’s second-largest shareholder, said on Thursday it believed the group was “undervalued”, but would not reveal whether it was prepared to sell its 8.9 per cent stake at the $30 level at which the private equity approach is said to be pitched.

The intentions of WR Huff, the US distressed asset buyer, remain unclear. Although Bill Huff is NTL’s fourth-
largest shareholder, he controls two board seats.

NTL’s shares were trading down 10 cents at $26.45 on Thursday after an 8 per cent rise on Wednesday, valuing the group’s equity at $8.6bn.

Given NTL’s $11bn of debt, any takeover would cost the bidders more than $20bn, making the deal Europe’s largest leveraged buy-out.