“It’s the business model we don’t like,” said the private equity company that had been looking at Virgin Media. Even so, considering all this talk about a credit crunch, about how all of a sudden private equity is struggling to raise the funding, one can’t help the suspicion there’s a little more to it than that.
The last few hours has seen a change in the makeup of business apparently looking at Virgin Media.
According to the Times, TPG - formerly known as Texas Pacific Group, has pulled out of the bidding circus. The newspapers said that it was understood TPG’s decision had nothing to do with the reported shortage of funding, which has been behind the stock market tumble seen in the last few days. Rather, the private equity group had misgiving about the Virgin Media business model.
And as they all move over and one falls out, another company has jumped into the marital bed in making, or at least rumours suggest this.
But on this occasion, the new bidder comes from within the industry. Liberty Global Inc. is one of those old fashioned types of bidders. It’s listed on the NASDAQ. For a chance the public can actually buy a piece of the action.
Liberty describes itself as “the leading international cable operator offering advanced video, telephone, and broadband Internet services” and makes much of the fact it operates communications networks in 17 countries principally located in Europe, Japan, Chile, and Australia. It employs 20,000 people.
But the real colour with Liberty comes in the shape of its long standing chairman John Malone. Mr. Malone is something of an enigma. He is known for his ordinary ways, for example he often stops off at truck stops while traveling in his camper van, but his negotiating style has earned him the nickname of Darth Vadar.
So the question is this, how will Darth Vadar and Sir Richard Branson hit it off?
The other party reported to still have amorous intentions regarding Virgin Media is the Carlyle Group - which is a private equity business to its core.
And so it may come down to straight battle between a business empire trying to expand, and what is often seen as the complete opposite, private equity - which is all about stripping assets to the profitable core.
On the other hand, neither Carlyle nor Liberty have confirmed they are definitely making an offer. And given the current market climate, it would appear that Virgin Media has once again got its timing wrong.
It timed its bid for ITV in such a way that BSkyB was able to swoop in and pick up stock in the TV broadcaster, making the Virgin bid untenable.
Now, it’s put itself up for sale, just as it appears the bottom is falling out of mergers and acquisitions.
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