Carlyle Group planning bid for Virgin Media

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Virgin Media reacted to growing speculation over its future by appointing Goldman Sachs to explore options and find a potential buyer for the struggling and debt-heavy cable operator and virtual mobile phone network provider.

The company has been entrenched in a a fierce marketing battle with rival BSkyB since March, after the two companies failed to renew a carriage deal for a group of popular TV channels including Sky One and Sky News. A wave of disconnections following the removal of the Sky channels from Virgin's cable TV service hit telephone and broadband subscriber numbers as well as revenues, as some customers left all of Virgin Media's services in one go and defected to Sky, which also offers broadband and telephony services as well as TV.

News of the appointment of Goldman Sachs broke on Sunday, after it received approaches from various private equity firms, people familiar with the situation said.

The Carlyle Group offered in recent weeks to buy the company, whose leading shareholder is Virgin boss Richard Branson with just over a 10 per cent share holding, the sources said, but they declined to disclose the price put forward.

Virgin Media, whose shares are listed in New York on Nasdaq rather than London has a market value of $8 billion (£4 billion), meaning any offer would likely exceed $10 billion based on the typical premiums paid in takeovers.

However, the company is still saddled with £6.1 billion of long-term debt and has undergone several debt-for-equity deals in its history to avoid the threat of bankruptcy.

Virgin and Carlyle both declined to comment. Goldman Sachs declined comment.

Virgin Media, which sells cable TV, telephone, broadband and mobile phone services (the latter under the Virgin Mobile brand), was formed by last year's union of NTL and Telewest. The new company then acquired Virgin Mobile from Branson and rebranded the entire group as Virgin Media. Its business telephony and broadband arm is still called NTL Telewest Business.

A group including Blackstone Group, Cinven, Kohlberg Kravis Roberts and Providence Equity Partners tried to buy Virgin Media last year, but was told its offer price was too low.

(Additional reporting by Kate Holton in London and Megan Davies in New York)

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