Liberty to buy Sunrise Communications for $7.4bln, stock price up 27%

Liberty to buy Sunrise Communications for $7.4bln, stock price up 27%
Written by:
Michael Harris
12th August, 11:14
  • Liberty to acquire Sunrise in a deal worth 6.8 billion Swiss francs ($7.4 billion)
  • Liberty will pay CHF110 per Sunrise share, which is almost 28% higher than yesterday’s closing price
  • Sunrise stock price surges 28% to trade around the agreed price of CHF110

Shares of Sunrise Communications Group AG (SIX: SRCG) skyrocketed after Liberty Global announced it has agreed a deal worth 6.8 billion Swiss francs ($7.4 billion) to buy the company. 

Fundamental analysis: A major deal agreed 

Sunrise Communications, the second-largest telecom provider in Switzerland, has accepted the offer from Liberty Group to buy 100% of all publicly-traded shares for CHF6.8 billion.  The deal will be funded from Liberty’s cash reserves (CHF3.5 billion) in addition to new debt.

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The US-based Liberty said that its all-cash public tender offer has been accepted at a price of CHF110 per share. The agreed price is nearly 28% higher than yesterday’s closing price. 

The combined business is expected to generate CHF3.17 billion in revenue on 2.1 million mobile post-paid subscribers, 1.2 million broadband subscribers and 1.3 million TV subscribers. Liberty expects the new company to hold 30% market share in each segment.

This news comes after Liberty’s UPC Switzerland, the largest cable operator in Switzerland, couldn’t be sold to Sunrise in December last year. Instead of selling its Swiss business, Liberty decided to double-down on Switzerland telecom and acquire Sunrise. 

“Fixed-mobile convergence is the future of the telecom sector in Europe, and now Switzerland will have a true national challenger to drive competition and innovation for years to come,” Mike Fries, CEO of Liberty Global, said in a statement

“The Board believes that the offer is in the best interest of our shareholders and will create opportunities for the Sunrise employees to be part of a fully converged national champion,” said Thomas D Meyer, Chairman of Sunrise Board.

Sunrise has recommended to its board to accept the takeover offer from Liberty. The largest shareholder that owns 24% of the company, Freenet AG, signed a binding, unconditional commitment to tender its shares at the offer price.

Technical analysis: Shares erupt to record highs

Following the announcement, shares of Sunrise skyrocketed to trade near the agreed price of CHF110 per share. This is more than 26% higher than yesterday’s closing price of CHF86.20. Sunrise stock price lost around 20% amid the pandemic, before rallying higher to erase all losses. 

The price is now likely to trade around CHF110 until the deal is finally agreed. 

Summary

Sunrise Communications stock price erupted higher after Liberty Global agreed to pay 6.8 billion Swiss francs ($7.4 billion) to buy 100% of all publicly-listed shares of the Swiss telecom company. 

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