A Closer Look at Liberty Global Inc. (LBTYA)-Virgin Media Inc. (VMED) Deal

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Reasonable Purchase Price

The deal valued Virgin Media at 8.8x 2012 operating cash flow multiple and 7x 2013E operating cash flow multiple, after adjusting for synergies and taxes. Liberty Global, with $17.19 billion in market, is valued a bit cheaper at 6.7x operating cash flow in the market. News Corp is trading at around $28.30 per share, with the total market cap of $66.3 billion. News Corp is valued the most expensive among the three, at 16.5x LTM operating cash flow. News Corp owns a 39.1% stake in the largest pay TV provider in the UK, BskyB. Several years ago, it offered $12 billion for the full control of BskyB. Gaining full control of BskyB would have given News Corp’s chairman, Ropert Murdoch, a significant footprint in the British media industry, where he had already owned the biggest market share in the newspaper market. However, in the middle of 2011, News Corp withdrew the bid in the wake of the company’s phone-hacking scandal.

Foolish Take

Going forward, Liberty Global was expected to have a mid-single digit revenue and operating cash flow growth, and mid-teens free cash flow growth. With the reasonable purchase price, Liberty Global would be a good long-term position in investors’ portfolio.

The article A Closer Look at Liberty Global-Virgin Media Deal originally appeared on Fool.com and is written by Anh HOANG.

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