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Private equity firm moves for Virgin Media

UK quad-play operator Virgin Media has been targeted by private equity firm Carlyle Group in a $10bn deal, according to press reports from the UK and US.

Virgin Media was born in February this year, following the purchase of Virgin Mobile’s UK operation by cableco NTL in 2006. NTL had previously merged with Telewest. It was hoped that respraying NTL in the colours of Virgin – one of the most well received brands in the UK – would help the firm overcome a weak reputation among consumers.

Soon after the rebrand, however, Virgin Media was hit by a disagreement with Sky over the costs it was paying to Rupert Murdoch’s satellite TV operation to screen its content to Virgin subscribers. The spat saw key Sky programming withdrawn from the Virgin Media portfolio and customers ditching its service.

It is understood that Virgin Media has asked its advisers, Goldman Sachs, to initiate an auction of the business. Success for Carlyle is by no means assured, as a number of other private equity firms and consortia are believed to be interested in purchasing the operator.

The move comes at a time when private equity firms are attracting criticism from some corners in the UK. The private equity sector in the UK is under investigation by the Treasury Select Committee following concerns raised over its approach to takeovers that lead to asset stripping, debt loading and headcount reduction. Tax breaks given to private equity firms on large profits have also drawn complaints.

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