Liberty Global, Vodafone to combine Dutch operations

Liberty Global plc (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK) and Vodafone Group Plc (LSE: VOD) say that Liberty Global Europe Holding B.V. and Vodafone International Holdings B.V. have agreed to create a joint venture that will merge their operating businesses in the Netherlands. The resulting company, which will operate under the Vodafone and Ziggo brands and be owned equally by the two companies, will offer broadband, mobile, and business services in direct competition with incumbent KPN.

Liberty Global plc (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK) and Vodafone Group Plc (LSE: VOD) say that Liberty Global Europe Holding B.V. and Vodafone International Holdings B.V. have agreed to create a joint venture that will merge their operating businesses in the Netherlands. The resulting company, which will operate under the Vodafone and Ziggo brands and be owned equally by the two companies, will offer broadband, mobile, and business services in direct competition with incumbent KPN.

The two companies hope to complete creation of the joint venture by the end of this year, pending regulatory approval.

The venture will benefit from the two companies existing resources and expertise. For example, on the consumer end, Ziggo will bring its Horizon TV product suite, 200-Mbps broadband Internet services capabilities, and Wi-Fi network to the table, which will combine with Vodafone's 4G mobile capabilities. Both companies also are active already in business services provision.

"The combination of Vodafone's leading mobile business with Ziggo's successful broadband and TV business creates a strong and competitive integrated communications player, which will invest in digital infrastructure, entertainment services and productivity applications for Dutch consumer, business and public sector customers," commented Vodafone Group Chief Executive Vittorio Colao. "Together we will be a stronger competitor in the Netherlands, benefiting customers of both companies and the market as a whole. This transaction marks a continuation of Vodafone's market-by-market convergence strategy and we look forward to partnering with Liberty Global to create a fully integrated provider in one of our core European markets."

The parent companies will provide a range of services to the joint venture, including IT and technology-related services, procurement, brand management, and other support services. The annual charges for these services will depend on how extensive they turn out to be.

To ensure both parents will invest equal amounts into the venture's founding, Vodafone will make a cash payment to Liberty Global of €1 billion. This figure is based on the enterprise value of each Netherlands business, after deducting Ziggo's €7.3 billion of net debt; currently, there is a €2 billion difference in the equity value of the two companies' Dutch operations. Vodafone Netherlands will be contributed to the joint venture on a debt- and cash-free basis.

The parent companies expect to derive significant synergies from the deal -- an estimated net present value of approximately €3.5 billion, including revenue synergies. This figure will come after approximately €350 million of integration costs over the first three years of operation. The synergy figure includes estimated cost and capex synergies with run-rate savings of €280 million on an annual basis by the fifth full year post closing.

The venture's supervisory board will comprise three representatives each from Liberty Global and Vodafone and two members nominated by the national Works Council. The post of chairman will be held for alternating 12-month periods by a Liberty Global or Vodafone appointed director. The venture's leadership team will be announced prior to completion of the merger.

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