Private equity bidders backtrack on NTL offer

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A private equity consortium which has worked for months on a $20bn (£10.6bn)-plus bid for NTL is understood to have retreated from making a firm offer for the UK cable operator.

Three people close to the buy-out group indicated there was no prospect of a deal soon, although they said they could yet revive their interest.

Members of the consortium, which is led by Providence Equity and including Blackstone, Cinven and Kohlberg Kravis Roberts, had held talks with Jim Mooney, NTL’s chairman, about a deal that would have been Europe’s largest buy-out.

However, they are understood to have failed to agree terms with the Nasdaq-listed group’s owners, who include Sir Richard Branson, the entrepreneur, and Bill Huff, the influential distressed debt investor.

Sir Richard, who sold Virgin Mobile to NTL and is licensing the Virgin brand for its cable, phone and broadband services, controls a 10.5 per cent stake. Mr Huff, who helped orchestrate NTL’s merger with Telewest, has since reduced his holding to below 7 per cent.

Some large investors had indicated they would hold out for at least $34 a share, which would value NTL’s equity at $11bn – about the same level as its debt. One adviser close to the consortium’s discussions said: “It’s a big price. A couple of months ago we were nowhere near $34, and the business has got worse, not better.”

“[The deal is] not dead but it is not very healthy either and it’s looking like it could die,” a person close to the buy-out team said. Two other people close to the consortium said the NTL talks had gone “very quiet”, but could be resurrected quickly given private equity’s longstanding interest in the cable business.

In its results, NTL cited intense competition and merger integration issues for a dip in broadband customers. Its shares were down 4 per cent at $25.44 in New York by Friday afternoon.

The consortium is understood to have struggled with the sheer size of the heavily indebted group, the fact that it might have to pay about $200m upfront to bondholders to meet change of control clauses, and with questions about the value of NTL’s vast tax losses.

Separately, Simon Duffy, the former head of NTL who was moved aside when Steve Burch became chief executive, is understood to be planning to step down from the board.

Gordon McCullum, chief executive of Virgin Management, became an NTL director this week, breaching a Nasdaq listing rule that most directors must be independent.

NTL said it would resolve the problem by December, “either by appointment of an additional independent director or by securing the resignation of an existing director”.

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