Liberty Global has agreed to acquire Sunrise Communications at an enterprise value of CHF 6.8 billion or $7.4 billion.
Liberty Global’s public tender at a price of CHF110 per share represents 32 percent premium to the 60-day’s share price. The offer price values Sunrise at a multiple of 10.0×2 LTM Q1-20 adj. EBITDA of CHF 678 million.
Sunrise said the combination will create a converged challenger across all elements of the 4 play bundled product, including fiber, cable, TV and mobile. Sunrise did not indicate about a possible job cut following the combination of the two.
The combined business will make investment in network roll-outs, including 5G and future technologies, offering up to 1Gbps speeds to 90 percent of Swiss households by 2021, with a clear roadmap to enable up to 10Gbps over time.
UPC Switzerland’s next generation fixed network with its fibre backbone will strengthen Sunrise’s leadership position in 4G and 5G.
Sunrise’s Board is recommending that its shareholders accept the offer. Freenet AG, the largest shareholder with 24 percent stake in Sunrise, has signed an unconditional commitment to tender its shares at the offer price.
There will be significant 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.
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 percent market share in each segment.
The integration of UPC’s gigabit 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 gigabit broadband speeds by 2021.
UPC Switzerland is the country’s leading provider of gigabit broadband.
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.
Mike Fries, CEO of Liberty Global, said: “This powerful combination of 5G wireless and gigabit broadband will accelerate digital investment.”
Liberty Global plans to fund the transaction through a combination of CHF3.5 billion of cash from its balance sheet and CHF3.2 billion of financing, of which CHF1.6 billion will be available to refinance existing indebtedness of Sunrise as needed.