Liberty Global is acquiring Switzerland based Sunrise Communications and as part of the deal, Liberty Global has agreed to make an all cash public tender offer for all publicly held shares of Sunrise at a price of CHF110 per share.
The offer represents a 32% premium to the 60-day volume weighted average price (“VWAP”) per share of CHF83.17 during the period up to (and including) August 11, 2020 and values 100% of Sunrise’s equity at CHF5.0 billion1, representing a total enterprise value of CHF6.8 billion2.
All-cash tender offer for 100% of the publicly held shares of Sunrise Communications Group AG (“Sunrise”) at a price of CHF110 per share, funded through a combination of Liberty Global’s existing cash, expected to be approximately CHF3.5 billion, and proceeds from new debt issuance.
Sunrise’s Board of Directors is unanimously recommending that its shareholders accept the offer; Freenet AG, Sunrise’s largest shareholder, which holds approximately 24% of Sunrise’s capital, has signed a binding, unconditional commitment to tender its shares at the offer price.
Transaction price is underpinned by significant expected total synergies of CHF3.1 billion on a net present value basis after integration costs, with the annual run rate of cost, capex and revenue synergies estimated at CHF275 million. The vast majority of the benefits (approximately CHF2.6 billion) relate to low risk cost and capital expenditure synergies.
Attractive acquisition valuation for both parties representing 7.5x adjusted EBITDA4 and 10.3x adjusted OpFCF5 after taking into consideration revenue, cost and capital expenditure synergies (net of upgrade costs)6, or 10.0x adjusted EBITDA and 17.6x adjusted OpFCF before synergies.
Combination will create the leading national converged challenger in Switzerland. Together, the combined business would have CHF3.17 billion in revenue, 2.1 million mobile post-paid subscribers, 1.2 million broadband subscribers and 1.3 million TV subscribers, reflecting approximately 30% market share in each segment.
Greater scope for investment in next-generation network and product innovation. After a full acquisition of Sunrise, the combined business will be strongly positioned to continue its network roll-out including 5G and future technologies, supporting a range of new and enhanced products and services.
The integration of UPC’s gigabit network, covering around 75% of homes, with Sunrise’s existing FTTH partnerships covering over 30% of homes, will ensure that 90% of Swiss households have access to 1 gigabit broadband speeds by 2021, with a clear roadmap to enable up to 10Gbps over time. In addition, UPC Switzerland’s extensive fibre backbone will further strengthen Sunrise’s leadership position in both 4G and 5G.
Differentiated, converged offers for customers. Sunrise is recognized as having best-in-class mobile infrastructure, while also building a meaningful customer base in broadband and TV. UPC Switzerland is the country’s leading provider of gigabit broadband, and offers the best video platform with features such as voice control, 4K, full content offerings and best in-class TV apps. As a fully converged provider, the combined business will be well positioned to compete in the Swiss market, accelerating the sale of converged fixed-mobile services to existing customers and new services using the best of each company’s product portfolios, skills and networks.
Strengthened B2B platform. UPC Switzerland’s growing B2B business (#2 behind Swisscom on fixed) will benefit from the enhanced scale delivered by Sunrise’s customer base, increasing the ability to cross-sell converged mobile and fixed products and deliver a stronger customer experience.
Value-enhancing transaction for Liberty Global shareholders. The transaction is consistent with Liberty Global’s strategy to create converged, national champions across its core European markets. It represents an attractive opportunity to deploy existing cash to unlock substantial synergies and sustainable free cash flow growth in a market where Liberty Global has invested for fifteen years.
Mike Fries, CEO of Liberty Global, added “The industrial logic of this merger is undeniable, but the real winners are Swiss consumers and businesses. This powerful combination of 5G wireless and gigabit broadband will accelerate digital investment at a time when connectivity has never been more essential. Fixed-mobile convergence is the future of the telecom sector in Europe, and now Switzerland will have a true national challenger to drive competition and innovation for years to come. We look forward to welcoming Sunrise employees to the Liberty and UPC family and congratulate them and the board on their success.”
He continued, “This transaction is another significant step on our path to create fixed-mobile champions in all of our core markets, crystallizing the value of our superior broadband networks and driving long-term, sustainable free cash flow growth. Even after this deal, and assuming completion of our recently announced UK transaction, we will continue to have approximately $7 billion of liquidity to drive value-creation for shareholders.”