British entrepreneur, Sir Richard Branson, has a 72% stake in the operator and has already given his blessing to the takeover offer. However, late last week the operator’s board of directors firmly rejected the deal on the grounds that it undervalued the business.
The minority shareholders who control 28.5% of the operator include Fidelity, Morley Asset Management, Deutsche Asset Management, and boutique fund manager Aberforth Partners.
NTL responded to the rejection by saying that the 817m pounds ($1.42bn) offer was a fair price representing better value for all Virgin Mobile shareholders. This has led to speculation that deal was deadlocked.
The sticking point is price, as most of the deal will be paid for in NTL shares, which are hardly attractive to Virgin Mobile’s minority shareholders because of NTL’s previous financial turmoil when it slid into Chapter 11.
NTL’s offer values each Virgin Mobile share at 323 pence ($5.61) in cash, which represents a 3.9% premium to Virgin Mobile’s closing price on the day before the deal was announced. This small premium has not impressed the minority shareholders, who would rather receive hard cash than the NTL shares.
According to the Financial Times, Branson is prepared to take a lower price for his share of the business, giving NTL more room to increase the amount the minority shareholders would receive.
There was little surprise that Branson is prepared to flexible, as he will be happy to become NTL’s largest shareholder with a 14% stake if the deal goes ahead. He is also expected to be actively involved in the management of the new company, with a possible seat on the board.