Liberty Global Announces CHF 500 Million Conditional Rights Purchase Commitment for Sunrise’s Financing of UPC Switzerland Acquisition
Liberty Global plc (“Liberty Global”) (NASDAQ: LBTYA, LBTYB and LBTYK) and Sunrise Communications AG (“Sunrise”) today announced an agreement whereby Liberty Global will support Sunrise’s rights offering related to the acquisition of UPC Switzerland1.
Liberty Global has agreed to support the Sunrise rights offering up to an aggregate amount of CHF 500 million2 through the purchase of tradeable subscription rights at market prices and the subsequent purchase of newly issued shares, if any, in the rights offering. If fully utilized, Liberty Global’s resulting ownership would reach 7.8% at current market prices3. 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 CHF 6.3 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. Olaf and his team are excellent operators and are uniquely qualified to realize the strategic and financial benefits of the merger.”
Sunrise shareholders will vote to approve the relevant capital increase required to consummate the transaction on October 23rd. The Swiss regulatory authority, WEKO, approved the deal without conditions, citing the fact that it will create the second largest telecommunications carrier in Switzerland and that the combination will stimulate competition. Glass Lewis, Ethos, zRating, three leading proxy advisory firms, recommended Sunrise shareowners approve the capital increase.
Separately, ISS issued a flawed report recommending that Sunrise shareholders vote against the capital increase. While ISS found the combined entity “could reasonably provide a strategic advantage” over the near and medium term, it raised unfounded concerns about the long-term viability of UPC’s fiber-rich HFC networks versus emerging technologies and, among other errors, misstated both current and historical transaction multiples.
“ISS demonstrated a surprisingly poor understanding of the telecom industry in this report,” said Fries. “Fixed-mobile convergence is the future. Industry leaders, regulators and sector analysts all agree on that point. European operators have already completed over €100 billion in transactions just like this one, and at even higher multiples. Nearly all of these transactions involved cable networks precisely because our systems are fiber-rich and future-proof. That’s just one of the many reasons we are so confident in UPC Switzerland even if this deal does not close. We’ve already launched gigabit speeds throughout Switzerland as well as 20 cities across Europe and, unlike telecom incumbents, have the fastest and most efficient path to 10 gig speeds down the road.”