425: Liberty Global Plans Sunrise Spin-Off in Q4 2024, Aims to Unlock Shareholder Value

Liberty Global is moving forward with its plan to spin off Sunrise GmbH in Q4 2024, expecting it to create significant value for shareholders.

Summary

• Liberty Global plans to spin off 100% of Sunrise GmbH to its shareholders in Q4 2024.
• The goal is to establish a fully distributed, local valuation for Sunrise, potentially increasing Liberty Global's stock value.
• The spin-off is subject to customary conditions, including shareholder approval and SEC effectiveness of the registration statement.
• Liberty Global will inject CHF 1.5 billion ($1.7 billion) into Sunrise to deleverage the company before the spin-off.
• Funding will come from All3Media proceeds ($400 million), Sunrise free cash flow ($400-$440 million), and $1 billion of corporate cash.
• Sunrise is expected to have an attractive dividend policy with a minimum of CHF 240 million per year.
• Analysts have estimated a preliminary value for Sunrise of approximately $11 per Liberty share.
• Liberty Global intends to conduct a Capital Markets Day followed by a roadshow to provide more information.
• Sunrise represents about 12% of Liberty Global's aggregate EBITDA and around 20% of proportionate EBITDA.
• Liberty Global will continue to provide technical, product, and administrative services to Sunrise after the spin-off.

Sentiment

Score: 8

Explanation: The document expresses a positive outlook regarding the Sunrise spin-off and its potential to unlock shareholder value. Management is confident in the transaction and its impact on Liberty Global's valuation.

Positives

• The spin-off aims to unlock shareholder value by establishing a local valuation for Sunrise.
• Sunrise is described as a best-in-class FMC champion in a stable market with growth potential.
• The deleveraging of Sunrise is expected to increase its equity value.
• The attractive dividend policy of Sunrise could provide a 4% yield on Liberty Global's entire market cap.
• Analysts' preliminary valuation suggests a significant potential upside for Liberty Global shares.

Negatives

• The spin-off requires shareholder approval and SEC effectiveness of the registration statement.
• Liberty Global's cash balance will be reduced by around $1 billion.
• The remaining Liberty Global business will be smaller after the spin-off, representing approximately 88% of aggregate EBITDA.

Risks

• The spin-off is subject to customary conditions and may not be completed on the expected timeframe or at all.
• There is a risk that the market may not re-rate Liberty Global's remaining assets after the spin-off.
• The company faces the risk of unanticipated difficulties or costs in connection with the Spin Transaction.
• Sunrise faces the risk of being unable to successfully operate as an independent public company and maintain its relationships with material counterparties after the Spin Transaction.

Future Outlook

Liberty Global expects the Sunrise spin-off to create significant value for shareholders and is committed to executing its growth and strategic plans for the remaining businesses.

Management Comments

• Michael T. Fries stated that the goal is to create a fully distributed local valuation for Sunrise which will represent a meaningful premium to our stock trades.
• Michael T. Fries mentioned that the Sunrise equity story is compelling and that the company has multiple growth levers and significant free cash flow margins.
• Michael T. Fries said that the Swiss transaction is going to be a game changer and its going to happen, and were all going to be very thankful that it does happen.
• Charles H.R. Bracken stated that assuming the current average analyst valuation of the company of CHF 8 billion, we arrived at $11 per share, pro forma for the cash injection of CHF 1.5 billion committed by Liberty Global.

Industry Context

The spin-off reflects a trend of companies focusing on core assets and unlocking value through strategic transactions. Liberty Global aims to capitalize on Sunrise's position as a pure-play national champion in the Swiss market.

Comparison to Industry Standards

• The document mentions that analysts have pegged the equity value of Sunrise in the range of $11 per Liberty share, but does not provide specific comparisons to other companies.
• The document does not provide specific comparisons to other companies or projects.

Stakeholder Impact

• Shareholders are expected to benefit from the increased value created by the spin-off.
• Employees of Sunrise will become part of an independent public company.
• Customers of Sunrise are not expected to be directly impacted by the spin-off.

Next Steps

• File a confidential Form F-4 with the SEC in May.
• Conduct a Capital Markets Day.
• Complete a roadshow.
• Complete the spin-off in Q4 2024.

Key Dates