LONDON (06/26/2000) - In a U.S. based agreement that has worldwide implications, Liberty Media Corp. -- the cable television unit of AT&T Corp.-- has agreed to acquire a 72 percent voting stake in broadband communications provider UnitedGlobalCom Inc., the companies announced on Monday.
As a result of the agreement -- valued between US$3.5 billion and $5.5 billion -- Liberty Media will increase its total voting stake in UnitedGlobalCom to 82 percent, though it will only own 45 percent of the outstanding shares, said spokesman Bert Holtkamp.
Liberty, which previously had a 7 percent stake in UnitedGlobalCom, will buy 75.3 million Class B shares of UnitedGlobalCom and will also make a cash payment of $200 million, Holtkamp confirmed. The Class B shares have 10 times the voting rights of the company's publicly traded Class A shares, he said.
UnitedGlobalCom, which is traded on the Nasdaq stock exchange, closed on Friday at $43.56 per share, which would put the total value of acquired stock at US$3.28 billion, but Holtkamp claimed that figure is higher. "In our discussions between the two companies, UnitedGlobalCom is valued at about $70 per share, which makes the total deal for us to be $5.5 billion," Holtkamp said.
Through the Liberty stake in UnitedGlobalCom, AT&T is looking to expand its cable and broadband holdings globally, officials said.
As part of a rearrangement of assets Monday, UnitedGlobalCom's United Pan-Europe Communications NV (UPC) affiliate announced it is buying a 25 percent stake in U.K. telecommunications company Telewest Communications PLC.
Up until today, the stake was owned by UnitedGlobalCom itself. As a result of this new arrangement, UPC, which was owned 51 percent by UnitedGlobalCom, will be 61 percent owned by UnitedGlobalCom.
"UnitedGlobalCom values Telewest at $3.1 billion," Holtkamp said. With 1.2 million cable subscribers and 1.7 million fixed line telephony subscribers, Telewest is the second largest broadband communications provider in the U.K., according to Holtkamp.
UPC plans to pay for its purchase of the 25 percent stake in Telewest by issuing 128 million new common shares, Holtkamp said. Based in Amsterdam, UPC offers cable television, telephony, high-speed Net access and programming services across 18 countries, including Israel, Holtkamp said.
The Monday agreements -- which are subject to regulatory review -- are also significant to Microsoft Corp., which owns a percentage in both UPC and Telewest. Earlier this month, Microsoft agreed to exercise warrants held in UPC to buy 5.7 million shares at a cost of $9.3 per share for a total value of $53.2 million, increasing its stake in UPC from about 7 percent to 8 percent.
[See "Microsoft Ups Stake in European Cable Company," June 12.]Furthermore, Microsoft and Liberty Media are jointly attempting to wholly acquire Telewest, a deal that is being investigated by European Commission. The Commission is looking into concerns that the transaction will not only restrict competition in the market for software for digital set-top boxes by requiring Telewest to buy Microsoft software, but will also strengthen Telewest's dominant position as the supplier of cable services to consumers in its U.K. franchise area. The Commission's report is due July 22. [See "Microsoft Purchase of Telewest Under EU Review," March 22.] "Yes, the EC is still looking into the joint acquisition of Telewest by Microsoft and Liberty Media. That is more of a question for Microsoft, and we do not see it having an effect on our deal with Liberty Media," UPC's Holtkamp said.
The software giant has gradually been building up its investments in foreign cable companies, also investing $500 million in U.K. firm and Telewest competitor, NTL Inc., in January of last year. In April this year, Microsoft said it had bought a majority stake in Titus Communications Corp., one of Japan's largest cable MSOs (multiple system operators).
Last September, Microsoft, Liberty Media and UPC formed a joint venture aimed at exploring content and distribution opportunities in Europe.
Monday's announcement by Liberty Media and UnitedGlobalCom also cast questions on Chello Broadband NV, which is wholly owned by UnitedGlobalCom's UPC. Chello was to spin off with its own initial public offering two months ago, but the IPO was halted due to "internal discussions of strategy," according to Holtkamp. "I know it is a stock thing to say, but the discussions about Chello's future are still continuing," Holtkamp said.
It has been widely rumored that Excite@Home Inc. is attempting to buy Chello, something which Excite@Home Chief Executive Officer George Bell refuses to confirm or deny. Meanwhile, AT&T, Comcast Corp. and Cox Communications Inc. are trying to gain majority control of Excite@Home, though the action has been postponed due to a court action by Cablevision Systems Corp. filed in Delaware Chancery Court last Friday. [See "AT&T Postpones Excite@Home Transaction," June 23.]Tele-Communications Inc. (TCI), founded by U.S. cable pioneer John C. Malone, merged with AT&T in March 1999 to create Liberty Media. Malone serves as Chairman of the Board for Liberty and also joined UnitedGlobalCom's board of directors, along with Greg Maffei, Chief Financial Officer at Microsoft, as part of the Microsoft, Liberty Media and UPC joint venture.
Liberty Media, in Denver, can be contacted at +1-720-875-5400 or at http://www.libertymedia.com/. UnitedGlobalCom, located in Denver, can be contacted at +1-303-770-4001 or at http://www.unitedglobal.com/. UPC, in Amsterdam, the Netherlands, can be contacted at +31-20-778-9840 or at http://www.upccorp.com/. Chello Broadband, in Schipol Rijk, the Netherlands, can be contacted at +31-20-778-8200 or at http://www.chello.com/. Telewest in Surrey, England, can be contacted at +44-1483-750900 or at http://www.telewest.co.uk/. Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or at http://www.microsoft.com/. AT&T, in New York, can be reached at +1-801-221-6000 or at http://www.att.com/.