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NTL acquire's
Telewest, creating the U.K.’s second largest communications
company
NTL acquire's Telewest, creating the
U.K.’s second largest communications company (03/10/05)
•
Creates the U.K.’s second largest communications company and leading
triple play service provider with pro forma combined revenues of £3.4
billion
• Combined customer base of nearly 5 million residential
subscribers and 10 million revenue generating units
• Transaction will
be significantly free cash flow accretive with approximately £1.5 billion
NPV of synergies
• Transaction values Telewest at approximately $6
billion or $23.93 per share; Telewest shareholders to receive $16.25 in cash
plus 0.115 shares of NTL for each Telewest share
London, United Kingdom,
October 3, 2005 – NTL Incorporated (NASDAQ: NTLI) and Telewest Global,
Inc. (NASDAQ: TLWT) announced today a definitive merger agreement under which
ntl will acquire Telewest, creating the U.K.’s second largest
communications company and leading triple play service provider with a cable
footprint covering more than 50 per cent of U.K. households. The combined
company will have nearly 5 million residential customers. It will be the
largest provider of residential broadband services in the country with 2.5
million subscribers, the second largest pay TV provider with 3.3 million
subscribers and also the second largest fixed telephony provider with 4.3
million subscribers.
The combination of the two companies’ local
access networks, which do not overlap, will provide a strong platform allowing
for product differentiation and innovation and the delivery of unique packages
of service offerings. The combined company will have the benefit of a much
larger cable network and, together with Telewest’s content division, will
strengthen cable’s position in the multi-channel TV marketplace.
Additionally, the transaction will create substantial synergies and provide the
impetus for increased product and technical innovation. Consumers will benefit
from greater choice, accelerated delivery of a broader range of personalised
communications and entertainment services and even better value.
On an
unaudited pro forma basis for the twelve months ended June 30, 2005, the
combined company would have had revenues of £3.4 billion (before
adjustments) and operating income before depreciation amortisation and other
charges (“OCF”) of £1.2 billion (before adjustments). The
combination will benefit from strong cash flows underpinned by tangible cost
and capex synergies, which are expected to make the transaction significantly
cash accretive in 2006, before restructuring costs, and significantly cash
accretive after all costs from 2007 onwards.
Under the terms of the
transaction, approved by the boards of both companies, Telewest shareholders
will receive $16.25 in cash and 0.115 shares of ntl stock for each common share
of Telewest they own, for a total consideration currently valued at
approximately $6 billion or approximately $23.93 per share. On this basis, upon
completion Telewest shareholders will own approximately 25 per cent of the
enlarged ntl. The transaction is subject to U.K. regulatory approvals, approval
by the shareholders of both companies and other customary closing conditions.
It is expected to close in the first quarter of 2006.
The Board of the
enlarged company will consist of all the current directors of ntl plus two
directors from Telewest. James Mooney will be Chairman of the Board of
Directors, Anthony (Cob) Stenham will be Deputy Chairman and Simon Duffy will
be the President and Chief Executive Officer. Telewest’s Acting Chief
Executive Officer, Barry Elson, will leave the company upon the completion of
the transaction and Telewest’s Chief Operating Officer, Eric Tveter, will
leave the company at the end of 2006. Their agreement to stay during the coming
months will allow Telewest to continue to benefit from their management and
advice during the completion of the transaction and subsequent integration
programme.
Simon Duffy, Chief Executive Officer of ntl, commented:
“This is a transforming transaction for the U.K. cable industry. It marks
not just the culmination of a decade of consolidation but, more importantly,
the creation of a new competitive force in the communications and entertainment
sectors in the U.K. By sharing best practices across ntl and Telewest and by
promoting innovation and leadership, the company will focus on enhancing dual
and triple play penetration, improving sales and marketing effectiveness and
driving customer centricity and service quality. This is a significant value
creation opportunity for shareholders.”
James Mooney, Chairman of
ntl, added: “Underpinned by a national strategy and increased scale and
reach, this transaction positions the enlarged company for greater success than
either company could have achieved alone. The company will have additional
resources to roll out new product offerings – such as HDTV, VoD and VoIP
– across its footprint. This procompetitive combination will provide
customers with improved access to competitively priced and flexible
communication and entertainment services.”
Anthony (Cob) Stenham,
Chairman of Telewest, stated: “We are very pleased to recommend this value
enhancing combination with ntl to our shareholders. The mix of stock and cash
consideration will enable Telewest shareholders to realise immediate value for
their shares and to participate in the upside of a combined company that is
better positioned to compete in the U.K. marketplace. I am proud of the
achievements of all the staff at Telewest, and I would also like to thank Barry
and Eric for their contributions, which have helped to establish the successful
and valuable business we are today.”
ntl and Telewest expect that
the proposed transaction will yield a net present value of approximately
£1.5 billion in synergies, net of the cost to achieve them. The gross OCF
and capex synergies are expected to be realised from 2006 onwards and ramp up
to an annual free cash flow run rate exiting 2008 of approximately £250
million, representing approximately 8 per cent of the combined company costs
and capex. The synergies will be realised through optimising networks, systems
and applications, implementing best practices and eliminating duplicated
activities.
As reported in second quarter 2005 results, Telewest and ntl
had approximately £1.7 billion and £1.5 billion in net debt
respectively, for a pro forma combined net debt of £3.2 billion. The cash
portion of the acquisition will be financed through approximately £1.8
billion in new financing and £500 million from existing ntl cash on hand.
In addition, the existing senior facilities of both companies will be
refinanced. ntl has received financing commitments for the full amount
necessary to effectuate the transaction. Net debt upon completing the
transaction will be approximately £5.7 billion, representing
approximately 4.7 x OCF. ntl expects free cash flow from the combined companies
to provide the flexibility to reduce combined debt to target levels over the
medium term.
ntl’s and Telewest’s executives will discuss
today’s announcement in a two-way conference call for financial analysts
and shareholders which will begin at 1:30 p.m. BST/8:30 a.m. EDT. The call can
be accessed by dialing (706) 679-4864 from outside the U.S. or (877) 226-8269
from within the U.S. and entering conference ID number 1065663. A replay of the
conference call will be available beginning at 3:00 p.m. BST/10:00 a.m. EDT on
October 3, 2005 through 2:30 p.m. BST/9:30 a.m. EDT on October 9, 2005 by
dialing (706) 645-9291 from outside the U.S. or (800) 642-1687 from within the
U.S and entering ID number 1065663. The call will also be web cast live at
ntltelewest.mergerannouncement.com,
www.ntl.com and www.telewest.co.uk. |
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