Telewest seeks payoff from NTL in £5.5bn merger talks

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The Independent Online

Cable firm Telewest will demand a cash payment from NTL in return for agreeing to become the junior partner in a merger with its rival.

Cable firm Telewest will demand a cash payment from NTL in return for agreeing to become the junior partner in a merger with its rival.

Discussions about the terms of the deal to create a £5.5bn cable giant are at an early stage. But it is understood that Telewest wants NTL to pay cash and shares for new shares in a merged company.

This means that Telewest's long-suffering shareholders, who received a 98 per cent stake in a $3.8bn (£2.1bn) debt-for-equity swap last year, could finally reap some reward for their investment. The company, listed on Nasdaq like NTL, has not paid dividends for several years.

The deal, which could be completed by the end of the year, is unlikely to be an equal partnership. NTL is expected to pay a small premium in cash and shares for Telewest, but no price has yet been decided. Analysts at investment bank UBS estimate that Telewest will agree to a deal of $22 per share. Its shares closed on Friday at just over $21.

With NTL expected to be the dominant partner, it becomes more likely that its chief executive, Simon Duffy, will head up the new cable group. His opposite number at Telewest, Barry Elson, could become non-executive chairman.

The companies will want to avoid the unusual structure adopted by the radio group GCap, which was formed earlier this year by the merger of GWR and Capital Radio. It is run by an executive chairman and a chief executive.

William Huff, who is a top-three shareholder in both Telewest and NTL, will play an important role in the negotiations. Because he is also a director of NTL, the companies will have to ensure he does not get price-sensitive information.

Telewest last week appointed the investment bank NM Rothschild to advise it on the merger. The company is already being advised by Deutsche Bank, which is handling the sale of its £1bn television content business, Flextech. Telewest and NTL have decided that a merged group should be a pure cable company.

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