Multinational telecommunications firm Liberty Global is set to acquire Swiss company Sunrise Communications in a deal estimated to be worth $7.4 billion. The two companies announced on Wednesday that they had reached an agreement and are proceeding with the transaction.
Liberty Global, which was formed by the merger of Liberty Media and United Global Com, has agreed to pay 6.8 billion francs, or roughly $7.43 billion, in cash to buy all of Sunrise Communications' shares. The price, which equates to about 110 francs per share, is a 32 percent premium over Sunrise's average share prices over the past two months.
The deal came as a surprise for industry experts as it is a significant departure from Sunrise's previous plans of taking over Liberty's business in Switzerland. The strategy reversal is also a contradiction to Liberty's previous plan of divesting its European assets.
Sunrise originally submitted a bid to buy Liberty Global's Swiss unit UPC last year. However, the deal never came to fruition due to heavy opposition from Sunrise's largest shareholder, Freenet. Activist investors AOC and Axxion were also against the acquisition.
As for the latest deal, the transaction was met with little opposition. Freenet, which owns a 24 percent stake in Sunrise, said in a statement that it considers the pricing of the deal to be fair and that a merger between the two companies makes sense. The merger is currently still subject to regulatory approval.
Once the deal is completed, the combined company will have a consolidated revenue stream of over 3.17 billion francs. It will also boast a mobile subscriber base of over 2.1 million, a broadband subscriber base of 1.2 million and a cable TV subscriber base of 1.3 million.
According to Liberty Global, it first approached Sunrise to discuss terms of a merger in July. Liberty Global's chief executive officer, Mike Fries, told reporters that the industrial logic of the merger is undeniable and it makes a lot of sense. The consolidation is expected to greatly reduce costs for both parties involved, while at the same time providing new opportunities for their mutual growth as a merged entity.
By combining their resources, the merged company will be in a better position to take on Switzerland's Swisscom. The state-controlled telecommunications firm is currently the market leader in providing mobile, internet and cable TV services in the country.
