UPC Switzerland

Liberty Global steps in to rescue UPC/Sunrise deal

In a bid to rescue the uncertain takeover of its subsidiary UPC Switzerland by Swiss telecommunications company Sunrise, Liberty Global is to participate in the capital increase arranged to finance the deal and become a shareholder in the combined entity. However, Sunrise’s largest single shareholder Freenet still opposes the transaction.

Liberty Global has agreed to support the Sunrise rights offering up to an aggregate amount of CHF500 million (€455 million) through the purchase of trade-able subscription rights at market prices and the subsequent purchase of newly issued shares, if any, in the rights offering.

If fully utilized, the move would lead to Liberty Global owning 7.8% in Sunrise at current market prices. Sunrise and Liberty Global have also agreed that Liberty Global will receive one board seat nomination as long as its shareholding exceeds 5%. All other terms of the CHF6.3 billion transaction remain unchanged.

“We have always believed in the logic of this combination. It creates a national powerhouse that will provide a fully-converged challenger to Swisscom and represents a smart and accretive transaction for both Sunrise and Liberty shareholders,” said Mike Fries, CEO of Liberty Global. “We are also happy to support the financing. Both investors and consumers win when this deal closes.”

The takeover of UPC Switzerland is subject to the majority of Sunrise shareholders approving the capital increase at an extraordinary general meeting scheduled for October 23, 2019. Swiss regulatory authority WEKO recently approved the deal without conditions.

Sunrise welcomed Liberty Global’s move, arguing that the company could add considerable value by leveraging its operational and integration experience to support the management in delivering the synergies and running its high-speed broadband network. Liberty Global’s investment in the capital increase would also lessen the financial commitment needed from Sunrise shareholders.

“We welcome Liberty Global’s investment in our rights issue which further validates the compelling strategic and financial rationale of the combination between Sunrise and UPC Switzerland,” said Peter Kurer, chairman of the board of directors of Sunrise. “Liberty Global is a leading global cable operator and will bring considerable experience to our board to support management in running the combined business and delivering on our identified, actionable synergies. We look forward to welcoming Liberty Global as a significant shareholder in our company and, in due course, as partner in our board.”

However, it still remains uncertain whether the deal will go through. Sunrise’s largest single shareholder, German media group Freenet, has decided to uphold its opposition although Liberty Global’s move to become a shareholder in the combined entity has been one of the conditions demanded by Freenet.

“Liberty Global’s participation does not change our position or that of the majority of other shareholders on the deal”, a Freenet spokesperson told Broadband TV News. “We continue to believe that the deal is not good. The latest developments show that Sunrise is now trying every trick in the book to turn the tide. Liberty Global merely announces that it will participate at rock-bottom prices with the money it has won from an overpriced sale. This is a slap in the face of all existing shareholders.”