NTL-ITV Bid: Big Investors Gung-Ho, Small Guys Hum-Ho

14 November 2006

LONDON: While there's enthusiasm aplenty at the prospect of a takeover bid by NTL for Britain's largest commercial broadcaster ITV [WARC News: 10-Nov-06], the former's smaller shareholders are less than euphoric.

Voicing their concerns to the Financial Times, the unnamed minnows fret that a bid could increase NTL's massive extant debt beyond the 5.5 EBITDA (earnings before interest, taxes, depreciation and amortization) multiple imposed by its current bond covenants.

Moreover, say the dissidents, NTL already has more than enough on its plate. They cite its merger earlier this year with former rival Telewest and recent acquisition of Virgin Mobile.

If there are any such qualms among the big boys, they're not rocking the boat - in public anyway. Sir Richard Branson's Virgin Group and W R Huff Asset Management between them own more than 17% of NTL and both are gung-ho at the prospect of acquiring ITV.

Meantime, NTL, a past master at financial prestidigitation, is reportedly in process of assembling a £10 billion ($19.02bn; €14.85bn) financing package to renegotiate the covenants on its existing £5.9bn debt.

This would confer the fiscal flexibility to bid for ITV, which is capitalised at more than £4.4bn and has about £700m of net debt.

ITV shares rose by 3% on Monday to £1.14¼p on news of the prospective bid.

Data sourced from Financial Times Online; additional content by WARC staff