Liberty Global Announces Intention to Spin-Off 100% of Sunrise to Shareholders
- Intention to spin-off 100% of Sunrise to Liberty Global shareholders.
- Aims to maximize shareholder value by unlocking Sunrise's fully distributed value.
- Liberty Global to invest up to CHF1.5B for debt reduction.
- Sunrise's strong cash generation profile to support attractive shareholder returns.
- Sunrise to be listed on the SIX Swiss Exchange with two classes of shares.
- Expected tax-free spin-off for US shareholders of Liberty Global.
- Sunrise to host a Capital Markets Day to provide more information on the transaction.
- Sunrise's strong FCF profile and attractive shareholder remuneration framework.
- Listing of Sunrise planned for 2H24 with a long dated, low-cost capital structure.
- Sunrise's financial guidance for 2024 includes stable revenue and adjusted EBITDA growth.
- Liberty Global to retain interests in other entities post-spin-off.
- None.
Insights
The announcement of Liberty Global's spin-off of Sunrise is a strategic maneuver aimed at unlocking shareholder value and enhancing capital allocation. The decision to invest up to CHF1.5 billion for debt reduction indicates a proactive approach to achieve an optimal leverage ratio of 3.5-4.5x, which is within the typical range for healthy telecom companies. This move is likely to be well-received by the market, as it suggests a strong balance sheet post-spin-off, potentially leading to a more favorable credit rating and lower cost of capital for Sunrise.
Furthermore, the commitment to shareholder returns through dividends and deleveraging, combined with continued investment for growth, signals a balanced approach between rewarding investors and funding operational expansion. This could attract a mix of income-focused and growth-oriented investors. The tax-free nature of the spin-off for US shareholders is also a positive aspect, as it removes a potential barrier to the transaction's acceptance.
From a market perspective, the spin-off of Sunrise allows for a more targeted investment thesis, as investors can choose between the distinct profiles of Sunrise and Liberty Global. As a fully-converged national challenger in the Swiss telecom market, Sunrise has the potential to capitalize on its strong 5G and fixed network infrastructure. This positions the company to potentially increase its market share in both B2B and B2C segments.
The Swiss telecom market is characterized by stable, favorable conditions, such as low inflation and an appealing tax environment, which could bolster Sunrise's financial performance. Moreover, the focus on cost efficiencies and low capital intensity, supported by a well-invested infrastructure, suggests that Sunrise is poised for sustainable growth and profitability.
The investment into Sunrise by Liberty Global, especially in the context of its strong Q4'23 performance, indicates confidence in the long-term economic prospects of the telecom sector in Switzerland. The stable macroeconomic fundamentals of the Swiss market, including low inflation and cost of capital, provide a conducive environment for Sunrise's growth and operational stability. The strategic focus on leveraging multiple growth levers, such as expanding market share and improving cost efficiencies, is likely to contribute positively to the overall economy by driving competition and innovation within the telecom sector.
Additionally, the proposed capital structure, with a focus on long-term fixed-rate debt, reflects a prudent financial strategy that can withstand economic fluctuations. This approach is likely to resonate with investors who prioritize stability and risk mitigation in their investment decisions.
- The spin-off aims to maximize shareholder value by unlocking the fully distributed value of Sunrise over time, supported by Sunrise’s fully integrated FMC challenger position, attractive growth outlook, excellent expected cash generation and experienced management team
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Liberty Global will invest up to
CHF1.5B ($1.7B - Sunrise’s strong cash generation profile expected to support attractive shareholder returns including dividends, deleveraging and continued investment to support future growth
- Sunrise will be listed on the SIX Swiss Exchange with two classes of shares
- Liberty Global has appointed J.P. Morgan and UBS as financial advisors
- The proposed spin-off is expected to be tax free for US shareholders of Liberty Global with evaluation of tax treatment in other jurisdictions ongoing and is subject to market conditions, board approval of the final terms of the transaction, shareholder approval and other customary closing conditions
- Sunrise will host a Capital Markets Day in due course to provide more information on Sunrise and the proposed transaction
The spin-off will leverage the full potential of Sunrise as a locally listed FMC challenger, building on the successful integration of Sunrise and UPC since their combination in 2020. The operational business will not be affected by the spin-off. Customers, employees, suppliers, or other stakeholders can rely on continuity.
Liberty Global CEO Mike Fries commented: ‘The proposed spin-off of Sunrise to Liberty Global shareholders is aligned with our strategy of unlocking value by allowing our shareholders to directly participate in the future performance of Sunrise. Liberty is fully committed to listing Sunrise with a strong capital structure which, alongside its future cash generation potential, will underpin Sunrise’s attractive equity story and scope for dividends.’
Sunrise CEO André Krause said: ‘We are excited at the prospect of being listed in
Key Sunrise investment highlights include:
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Attractive macro and telecom market:
100% exposure to the attractive Swiss telecom market, characterized by favorable macro fundamentals including low inflation, appealing tax environment and low cost of capital, a stable three-player structure and supportive regulatory framework - Strong fully-converged national challenger: Clear number two operator with scaled positions across all fixed, mobile and converged products in the market
- Best 5G coverage and next-generation fixed network: Delivering nationwide 5G and 1 GIG coverage to support a multi-brand strategy and converged offerings
- Multiple growth levers: Strategy focused on growing share in B2B and B2C segments, combined with further cost efficiencies and low capital intensity, benefiting from high quality, well-invested infrastructure and attractive wholesale economics
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High cash generating asset: Sunrise benefits from strong cash generation and expects to have a more de-levered balance sheet with a long-term fixed rate debt profile (with 5 years average maturity, ~
3% average cost of debt) enabling an attractive dividend distribution policy going forward - Experienced management team: Sunrise leadership have strong telecoms track record and experience in managing a listed company with CEO André Krause and CFO Jany Fruytier
The listing of Sunrise on the SIX Swiss Exchange is planned for 2H24. Sunrise will be listed with a long dated, low-cost capital structure supported by up to
Following a strong Q423 performance at Sunrise with a return to both revenue and adjusted EBITDA growth, we are communicating the following Sunrise financial guidance for 20243: stable revenue, stable to low-single digit adjusted EBITDA growth on a rebased basis4, P&E additions as a percentage of sales of 16
The proposed spin-off is expected to be tax-free for Liberty Global US shareholders with evaluation of tax treatment in other jurisdictions ongoing and is subject to market conditions, board approval of the final terms of the spin-off, Liberty Global shareholder approval and other customary conditions.
Following the Sunrise spin-off, Liberty Global will retain its consolidated interests in Telenet, Virgin Media Ireland, and its joint venture stakes in Virgin Media-O2 and VodafoneZiggo in addition to its Ventures portfolio and significant remaining cash balance.
Liberty Global believes the spin-off will deliver significant benefits for both Liberty Global and Sunrise shareholders, including through:
- Optimized capital structures to pursue their distinct strategic agendas for long-term value creation
- Distinct and compelling investment profiles appealing to broader, deeper investor bases including local Swiss/European investors as well as index/passive demand for Sunrise
ABOUT LIBERTY GLOBAL
Liberty Global (NASDAQ: LBTYA, LBTYB and LBTYK) is a world leader in converged broadband, video and mobile communications services. We deliver next-generation products through advanced fiber and 5G networks, and currently provide over 85 million* connections across
Liberty Global's consolidated businesses generate annual revenue of more than
Liberty Global Ventures, our global investment arm, has a portfolio of more than 75 companies and funds across the content, technology and infrastructure industries, including stakes in companies like ITV, Televisa Univision, Plume, AtlasEdge and the Formula E racing series.
* Represents aggregate consolidated and
** Revenue figures above are provided based on full year 2023 Liberty Global consolidated results and the combined as reported full year 2023 results for the VodafoneZiggo JV and full year 2023 U.S. GAAP results for the VMO2 JV.
Sunrise, Telenet, the VMO2 JV and the VodafoneZiggo JV deliver mobile services as mobile network operators. Virgin Media Ireland delivers mobile services as a mobile virtual network operator through third-party networks. UPC Slovakia delivers mobile services as a reseller of SIM cards.
Liberty Global Ltd. is listed on the Nasdaq Global Select Market under the symbols "LBTYA", "LBTYB" and "LBTYK".
For more information, please visit www.libertyglobal.com.
No offer to sell or solicit
This communication is not an offer to sell or a solicitation of offers to purchase or subscribe for shares or a solicitation of any vote or approval. This document is not a prospectus within the meaning of the Swiss Financial Services Act and not a prospectus under any other applicable laws. Copies of this document may not be sent to, distributed in or sent from jurisdictions in which this is barred or prohibited by law. The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, in any jurisdiction in which such offer or solicitation would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction and there shall be no sale of securities in any such jurisdiction.
This announcement is only addressed to and directed at specific addresses who: (A) if in member states of the European Economic Area (the EEA) are people who are “qualified investors” within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (as amended) (the Prospectus Regulation) (Qualified Investors); and (B) if in the
This communication is an advertisement for the purposes of the Prospectus Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended) and underlying legislation. It is not a prospectus. A copy of any prospectus published by the Company will, if approved and published, be made available for inspection on the issuer’s website at www.libertyglobal.com subject to certain access restrictions.
Additional Information and Where to Find It
In connection with the spin-off of Liberty Global’s businesses attributed to Sunrise into a separate publicly traded company (the “Transaction”), a registration statement on Form F-4 that will include a preliminary proxy statement (the “Proxy Statement/Prospectus”) will be filed and mailed to the Liberty Global shareholders. LIBERTY GLOBAL SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS THERETO AND ANY DOCUMENTS INCORPORATED BY REFERENCE THEREIN AND OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE PROPOSED TRANSACTION THAT LIBERTY GLOBAL AND SUNRISE WILL FILE WITH THE SECURITIES AND EXCHANGE COMMISSION WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. Liberty Global shareholders and investors may obtain free copies of the Proxy Statement/Prospectus and other relevant materials (when they become available) and other documents filed by Liberty Global and Sunrise at the SEC’s website at www.sec.gov. Copies of the Proxy Statement/Prospectus (and other relevant materials when they become available) and the filings that will be incorporated by reference therein may also be obtained, without charge, by contacting Liberty Global’s Investor Relations at ir@libertyglobal.com or +1 (303) 220-6600.
Participants in the Solicitation
Liberty Global and its directors, executive officers and certain employees, may be deemed, under rules of the Securities and Exchange Commission (the “SEC”), to be participants in the solicitation of proxies in respect of the proposed Transaction. Information regarding Liberty Global’s directors and executive officers is set forth in Liberty Global’s filings with the SEC. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Proxy Statement/Prospectus and other relevant materials to be filed with the SEC (when they become available). These documents can be obtained free of charge from the sources indicated above.
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1 FX rate as of Feb 15 2024
2 FX rate as of Feb 15 2024
3 Based on current reporting under US GAAP
4 Rebased growth percentages, which are non-GAAP measures, are presented as a basis for assessing growth rates on a comparable basis. We calculate Sunrise rebased growth percentages consistent with the way we calculate Liberty Global rebased growth percentages in our earnings releases
5 We define Adjusted FCF as net cash provided by the operating activities of our continuing operations, plus operating-related vendor financed expenses (which represents an increase in the period to our actual cash available as a result of extending vendor payment terms beyond normal payment terms, which are typically 90 days or less, through non-cash financing activities), less (i) cash payments in the period for capital expenditures, (ii) principal payments on operating- and capital-related amounts financed by vendors and intermediaries (which represents a decrease in the period to our actual cash available as a result of paying amounts to vendors and intermediaries where we previously had extended vendor payments beyond the normal payment terms), and (iii) principal payments on finance leases (which represents a decrease in the period to our actual cash available)
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Investor Relations
Michael Bishop +44 20 8483 6246
Corporate Communications
Bill Myers +1 303 220 6686
Matt Beake +44 20 8483 6428
Source: Liberty Global Ltd.
FAQ
What is Liberty Global's intention regarding Sunrise?
How much will Liberty Global invest for debt reduction in the spin-off?
Where will Sunrise be listed post-spin-off?
What are some key highlights of Sunrise's investments?
What financial guidance has Sunrise communicated for 2024?
