NTL Inc. and Telewest Global, the United Kingdom’s two largest cable operators, could seal a merger deal as early as this month, according to reports in several British newspapers.
According to a report in The Independent, NTL and Telewest could seal a $12-billion merger deal as early as the end of July. In an article July 3, the newspaper quoted sources familiar with both companies saying a deal would be unlikely to close past July 31.
Speculation surrounding the two MSOs has been rampant since Telewest emerged from bankruptcy protection last year, renaming itself Telewest Global. But according to reports, merger talks heated up in June, after both companies hired financial advisers to help with negotiations. Telewest hired Deutsche Bank; NTL tapped Goldman Sachs & Co.
One of the largest shareholders in the newly constituted Telewest is New Jersey-based W.R. Huff Asset Management, a big Adelphia Communications Corp. bondholder, which swapped its debt position in Telewest for 16.2% of its equity. W.R. Huff is also the second-largest shareholder in NTL, with about 10% of its equity.
NTL, which emerged from bankruptcy itself in 2003, would offer a mixture of cash and stock in the deal, according to the Independent.
It is expected that NTL chairman Simon Duffy would retain that position in the new company and that Telewest CEO Barry Elson would become non-executive chairman.
Still at issue is what to do with Telewest’s Flextech programming arm. According to published reports, NTL is not interested in owning programming and would like a deal for Flextech to be at least in the works before it completes the cable-system deal.
Flextech is the largest single provider of television channels in the U.K. — it owns 10 channels outright and is a 50-50 partner with the British Broadcasting Corp. in UKTV, which owns another 11 channels.
According to a research report by UBS Warburg media analyst Aryeh Bourkoff, Flextech is valued at between $1.4 billion and $1.9 billion.
NTL is the largest MSO in the U.K. with 3 million subscribers. Adding Telewest’s 1.8 million customers would put it on more even footing with the dominant pay TV operator in Britain, News Corp.’s British Sky Broadcasting Group plc, which has about 7.6 million subscribers in the U.K. and Ireland.
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