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Carlyle Group makes US$11.35 billion bid for Virgin Media

Virgin Media Inc received a buyout offer worth as much as US$11.35 billion, people familiar with the deal said on Monday, sending shares in the British telecommunications company to a new one-year high.

Underscoring the delicate nature of the proposal, Virgin Media would not name its suitor and said the deal would be scrapped if it even disclosed the potential terms.

The offer of between US$30 to US$35 per share was made by the Carlyle Group, a Washington-based private-equity firm, said people who spoke on the condition that they not be identified because they were not authorized to do so publicly. Virgin also has roughly £6 billion (US$12.1 billion) of debt.

Virgin Media would say only that the offer came after it began a review with Goldman Sachs to explore "strategic alternatives," including a possible sale. Despite being formally based in New York and listed on NASDAQ, the company's operations are in the UK.

Virgin Media said "there is no assurance that any transaction will occur or, if so, at what price."

The company said it does not plan to comment further until a deal is reached or the offer is dropped.

Shares of Virgin Media jumped 18.4 percent, or US$4.48, to US$28.85 in afternoon trading.

The aggregation of cable operators NTL Inc and Telewest and the mobile operator Virgin Mobile, the company reported its seventh consecutive quarterly loss in May after subscribers defected to rival satellite service BSkyB.

Thomas Eagan, a media analyst at Oppenheimer & Co, said going private could make Virgin Media more competitive. The company wouldn't have to publicly disclose its operating and financial figures, he said, and would be less constrained in terms of marketing, customer service and programming costs.

Other cable operators, such as Insight Communications Inc and Cox Communications Inc in the US, have gone private in recent years.

"Private equity has shown that it likes cable stocks," Eagan said. "Here's one that's trading at a pretty low multiple versus US cable stocks with a high cash flow yield compared to US cable stocks."

Virgin Media was formed to create Britain's first "quadruple play" service, offering mobile phone, fixed-line phone, Internet broadband and TV services. It has struggled, however, to provide solid services across all four platforms and recently invested substantially in revamping its customer service.

Virgin Media stopped airing basic BSkyB channels, dropping popular US programs such as Lost and 24 as the result of a battle over fees during negotiations to renew a distribution agreement.
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