Liberty Global hopes to revive deal as Sunrise to take $125 million hit

ZURICH (Reuters) - U.S. cable group Liberty Global LBTYA.O is holding out hope of reviving a sale of its Swiss unit to Sunrise Communications SRCG.S, which said on Wednesday it faces a 125 million Swiss francs ($125 million) hit after abandoning the deal.

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Sunrise said costs from the 6.3 billion franc bid, halted after opposition from the Swiss telecom firm’s top shareholder, include a 50 million franc break-up fee to Liberty Global, 19 million francs in underwriting fees and already-incurred integration costs of 24 million francs.

Last month, Sunrise scrapped its takeover of Liberty's UPC Switzerland business when German firm Freenet FNTGn.DE, which holds a 25% stake, balked on concerns the move was too expensive.

Freenet said that adding cable assets made little sense as the industry was transitioning to faster 5G mobile technology.

Liberty Global Chief Financial Officer Charlie Bracken said the company was not completely forgetting about the transaction and said the deal was still worth pursuing.

“If you look at the industrial logic of the deal it’s very compelling,” Bracken told the Morgan Stanley European TMT Conference in Barcelona, adding that he saw “a lot of reasons to monetise” the synergies it promised.

Bracken also said that Liberty would look at listing its local units, which would help to crystallize the value of their cash flows. “We’ll be opportunistic,” he said.

Sunrise, which released third-quarter results on Wednesday, said intimations that the deal could rise from the dead were “no longer relevant” and that for now it was moving on.

“All further talk at this time is hypothetical and speculative,” Sunrise Chief Financial Officer Andre Krause told Reuters in an interview.

Sunrise shares were little changed at 1400 GMT and are down nearly 10% this year.

CEO Olaf Swantee, responding to a suggestion that he could resign after failing to seal the UPC transaction and falling out with top shareholder Freenet, said he and other managers were simply focused on Sunrise.

Swantee, a Dutchman who previously ran British mobile phone company EE Limited, added that Chairman Peter Kurer, who has come under fire for trying to force the deal, continues to enjoy management’s support.

“Grumblings in the press about him are to a large extent unfair,” Swantee said. “He’s done a great job.”

Sunrise reported a 52% surge in net income to 48 million francs on revenue up 1% to 474 million francs for the quarter to September 30.

For 2019 it expects earnings before interest, taxes, depreciation and amortisation (EBITDA) of 618-628 million francs on revenue of 1.86-1.9 billion and a dividend of 4.35-4.45 francs per share.

Reporting by John Miller and Oliver Hirt in Zurich, Doug Busvine in Barcelona; editing by Sherry Jacob-Phillips, Kirsten Donovan