Why did NTL decide to takeover Virgin mobile - Essay Example

The increased offer is worth 372p per share to the Virgin’s minority shareholders but Sir Branson ‘has agreed to accept less than that for his 72 per cent stake to bridge the difference in price between the two sides’ (The Independent, Jan 14, 2006). The board of Virgin Mobile rejected the initial offer tabled by NTL, which was worth 323p per share, on the grounds that it materially undervalued the business. The board rejected the initial offer of 817 million after consultation with the major independent shareholders and all its decision was in the interest of its shareholders.

Speculations were on that there might be higher bids being offered to the company, which is the reason why the board of Virgin rejected the initial offer but Virgin has received no offers. Sir Richard has agreed to accept the offer of 360p per share and make up the difference with his own money. He is willing to take a slight discount to what the minority Virgin shareholders will receive. Under the original deal, Sir Richard would have 14 percent stake in the enlarged Virgin Mobile/NTL group but now that would stand at 12.5 percent. He would still remain the single biggest shareholder in the company.

Virgin is determined to see the merger through, as it will present serious competition to BSkyB in the UK market. All through the negotiations, the interest of the minority stake holders was paramount. The benefits seem to be more for Virgin. Virgin expects to gain an empire at the risk of its reputation. The merger would also be a boon for the 1500 staff of Virgin who has seen a 60 percent leap in the value of the free shares that was given to them last year (The Mirror, Dec 6, 2005). Besides, Branson would become one of the most powerful figures in British TELEVISION Analysts feel that the merger plan is a game of brands.

NTL will get the brand name benefit by using the name