Liberty Global announced a new attempt to merge its Swiss business UPC with Sunrise. The company has agreed a takeover of Sunrise for CHF 110 per share and an enterprise value of CHF 6.8 billion. This is a 32 percent premium to Sunrise's average share price in the past two months.
Sunrise tried last year to acquire UPC Switzerland, the local subsidiary of Liberty Global, but was forced to abandon the deal after shareholders would not back a capital increase of CHF 2.8 billion needed to finance the acquisition. The board of directors at Sunrise has accepted the new offer from Liberty Global, and Freenet, the largest shareholder in Sunrise which blocked the previous attempt at a merger, has also agreed to tender its shares.
The companies estimate annual synergies from the merger at CHF 275 million and the total amount to reach CHF 3.1 billion. They expect to receive approval from regulatory authorities by the end of this year. Together, the combined business will be Switzerland's second-largest operator, with CHF 3.1 billion in revenue, 2.1 million mobile post-paid subscribers, 1.2 million broadband subscribers and 1.3 million TV subscribers, and approximately 30 percent market share in each segment.
Liberty Global will fund the acquisition with existing cash, expected to be approximately CHF 3.5 billion, and proceeds from issuing new debt. It estimates the deal values Sunrise at 7.5x annual EBITDA after taking into account expected synergies. The tender offer will start at the end of August and is conditional on Liberty Global acquiring at least two-thirds of Sunrise shares.
The new deal sees the company take the lead in the merger, after previously wanting to exit the Swiss market. It's also the latest step in Liberty Global pursuing a fixed-mobile convergence strategy. The merger gives it access to its own mobile network and the roll-out of 5G networks.
The integration of UPC’s gigabit cable network, covering around 75 percent of homes, with Sunrise’s existing FTTH partnerships covering over 30 percent of homes, will ensure that 90 percent of Swiss households have access to 1 Gbps broadband speeds by 2021, it added. In addition, UPC Switzerland’s fibre backbone will reinforce Sunrise's 4G and 5G networs.
