Cometh the market rally, cometh the M&A. Liberty Global, the business of pioneering US cable guy John Malone is readying a bid for Virgin Media, expected to value the UK-focused broadband business at more than $20bn.
This is a consolidation play in a market that lends itself to gigantism. Liberty Global is an active cabler of continental European markets. But it spools no fibre in the UK.
Virgin Media, which is quoted on Nasdaq and in London, is the inheritor of the top-notch UK network created by NTL. This over-leveraged business crashed into Chapter 11 protection in 2002, and combined with erstwhile deadly rival Telewest in 2006.
Plug in Virgin Media and Liberty Global’s European proposition is instantly more compelling.
But shareholders in the group are far from being distressed sellers. Since incoming chief executive Neil Berkett prioritised fast broadband in 2008, a total shareholder return of 170 per cent has outstripped payback generated by competitors British Sky Broadcasting and TalkTalk, according to S&P Capital IQ statistics.
The London quoted shares rose 14 per cent this morning to £28 ($44) each. Analysts at Citi have floated the idea of an offer at $47.40, representing a 22 per cent premium and a 19 times multiple of forecast earnings. With consumers ever hungrier for bandwidth, investors could legitimately regard this as a floor price.