Liberty Global (NASDAQ:LBTYA) has reached a binding agreement to sell its Swiss operation, UPC Switzerland, to Sunrise Communications Group AG. As of Dec. 31, 2018, UPC Switzerland's network passed 2.3 million homes and served 1.1 million customers who subscribed to 1.1 million video, 700,000 broadband and 520,000 voice services.
Liberty Global will sell UPC Switzerland for a total enterprise value of CHF 6.3 billion ($6.3 billion1) on a U.S. GAAP basis. Sunrise will acquire the business inclusive of the UPC Holding borrowing group's existing senior and senior secured notes and associated derivatives and certain other debt items, which have an aggregate value equal to approximately CHF 3.7 billion ($3.7 billion1) as of Dec. 31, 2018. The net proceeds to Liberty Global, which will be paid in cash, are expected to be CHF 2.6 billion3($2.6 billion1), subject to customary other liabilities and working capital adjustments at completion.
Closing of the transaction is subject to regulatory approval, which is expected prior to year-end 2019, and approval by Sunrise's shareholders.
Mike Fries, chief executive officer of Liberty Global, said: "Today's announcement further validates our strategy of building or enabling national champions in our core European markets. After 13 years of investment, innovation and growth, UPC Switzerland will combine with Sunrise to form a strong challenger in the Swiss market. This is a great moment for the Swiss consumer as network quality, product innovation and customer experience is at the heart of both companies. We are extremely proud of what we have achieved in this market and are thrilled for our shareholders who will benefit from yet another example of value creation. After an investment of $1.6 billion in 2005, we will have realized at closing $6.5 billion of dividends and equity proceeds, or nearly four times our capital in this market."
The net proceeds from the sale are expected to be used for general corporate purposes.
Liberty Global has agreed to provide certain transitional services to Sunrise for a period of up to five years following completion. Such transitional services principally comprise network and information technology-related functions. The annual charges for such transitional services will depend on the actual level of transitional services required by Sunrise.