PDA

View Full Version : Richard Branson cuts Virgin Media stake to 6.5%



Jasmeet_87
15th May, 2009, 07:59 PM
Richard Branson has cut his stake in Virgin Media by more than a third ? to just 6.5% ? but has dismissed speculation that he is no longer committed to the cable company.

The move, revealed in US regulatory filings last night, is the result of Branson's decision, in May 2007, to raise $224m (?147m) by pledging part of his then 10.45% Virgin Media stake to investment bank Credit Suisse. Branson's Virgin Group used that cash to set up Virgin Mobile in India and start a renewable energy investment fund.

Under the terms of the Credit Suisse deal, Branson had the option of buying back the 12.8m Virgin Media shares he had mortgaged after two years, but has declined to do so.

A spokesman for Virgin Group denied that the deal was evidence of Branson abandoning Virgin Media, or that it suggests that the entrepreneur's empire is short of cash.

"Our brand is in Virgin Media and we are committed to it, we have board seats and a lot of support for management there," he said. "This is just about asset allocation, we have 50 big businesses and we are investing in new ones all the time."

"This was done two years ago. Just look at the economics of it: it was done at a time when share prices were high and we had a number of other ventures that we wanted to invest in. It was a bit of financial engineering to get some capital and it just makes sense now to see it through."

The deal leaves Branson as Virgin Media's fourth largest shareholder. Investment house Fidelity, which has been snapping stock up in the market, is the largest shareholder with 13.28%, while Franklin Mutual Advisors has 9.95% and Wellington Management 8.51%.

Virgin Media's shares were trading at about $24 at the time of the 2007 Credit Suisse deal, which came just before the cable company was approached by private equity group Carlyle about a possible takeover.

But since then, the stock has plunged, although Virgin Media's actual financial performance has improved, as stockmarkets worldwide have been hit by the credit crunch.

The deal had an upper price limit ? or "cap" ? of $31.98 a share, and a lower price limit ? a "collar" ? of $19.68 a share. With the Virgin Media stock trading under $7 Virgin Group has decided to hand full ownership of the shares to Credit Suisse rather than have to buy the 12.8 million shares back at the collar price.

The move does not, however, leave Credit Suisse with a vast slug of Virgin Media shares because it has been hedging its position by effectively selling the stake it was loaned by Virgin Group by taking short positions in the market.

Richard Branson cuts Virgin Media stake to 6.5% | Media | guardian.co.uk (http://www.guardian.co.uk/media/2009/may/15/richard-branson-virgin-media)