Carlyle Group is talking to British cable operator Virgin Media (NASDAQ: VMED) about taking over the company for about $20 billion. Blackstone (NYSE:BX) and KKR talked to the firm about a buy-out for $15 billion late last year, so the price is going up.
Virgin's market cap is only $8 billion, so any purchase would include the assumption of substantial debt.
The real question about Virgin is why anyone would want to own it. The company competes with a robust telecommunications industry which includes BT (NYSE: BT) and Vodafone (NYSE: VOD). Rupert Murdoch's British Sky Broadcasting (NYSE: BSY) delivers video services to large number of homes in the UK. Virgin hardly has an easy time competing. Murdoch's operation is taking subscribers from the cable company, and Virgin now routinely loses money.
Why would anyone want to pay a premium for it?
Douglas A. McIntyre is a partner at 24/7 Wall st.
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