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Virgin to go private

• Robert Peston
• 2 Jul 07, 06:10 AM

The tidal wave of private-equity takeovers of British companies shows no sign of abating, even though the cost of borrowing to finance those deals has been rising, and in spite of politicians' growing unease about how little tax is paid by the beneficiaries.

The latest household-name business poised to fall under the control of private equity is , the cable TV, mobile phone and broadband business.

, one of the world's leading private equity groups, has made a preliminary offer for Virgin – which is listed on the rather than London – of between $33 to $35 per share for Virgin, well above its closing price on Friday of $24.37 per share.

That would value Virgin at approximately £5.6bn. The total value of the takeover deal – including Virgin's debt of almost £6bn – would be around £11.5bn.

It would therefore be the second biggest ever takeover of a British business by private equity, after Boots.

However it is too early to say whether Carlyle will end up as the owner of Virgin Media.

Virgin's board has asked its investment bankers, , to conduct an auction of the business.

It is believed that Virgin's managers feel that the business would be in a better position to grow as a private company. They would be freed from the onerous requirement to make quarterly announcements of earnings and could be less fettered in the way they invest in the business.

, another private equity group, is believed to have put together a consortium of private equity players to make an offer for Virgin.

A banker said there was likely to be interest in Virgin from "several other private equity groups".

The largest investor in Virgin Media is Sir Richard Branson. Sources close to Sir Richard say he would like to remain a shareholder in Virgin as and when it has been taken private.

It is believed that most of the other leading Virgin shareholders would be keen to sell at somewhere around the price offered by Carlyle – though the Virgin board believes the business could be worth around $40 a share.

Following pressure from leading shareholders, in May Virgin asked Goldman to carry out detailed research on what the business is worth, or what's known as a valuation exercise.

Virgin is a substantial business. It has 9m customers and annual turnover of £4bn.

It is in a bitter legal dispute with following the failure of the two businesses to reach an agreement on terms for Sky to be carried on Virgin's cable channels.

In its last results, Virgin said it had 3m users of its television services, 3.4m broadband customers, 4.5m subscribers to its mobile phone service and 4.1m fixed-line telephone customers.

It is believed that Goldman will take around six weeks to whittle down the actual and potential bidders for Virgin to a definitive short list.

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