Acquisition and Joint Venture Transactions

Pending Joint Venture Transaction

On February 15, 2016, we and Liberty Global Europe Holding B.V., our wholly-owned subsidiary, entered into a Contribution and Transfer Agreement (the Contribution Agreement) with Vodafone Group plc (Vodafone) and one of its wholly-owned subsidiaries. Pursuant to the Contribution Agreement, our company and Vodafone agreed to form a 50:50 joint venture (the Dutch JV), which will combine Ziggo Group Holding and our Sport1 premium sports channel with Vodafone’s mobile businesses in the Netherlands (Vodafone NL) to create a national unified communications provider in the Netherlands with complementary strengths across video, broadband, mobile and B2B services.

At the closing of the transaction contemplated by the Contribution Agreement, Vodafone will pay to our company an equalization payment equal to approximately €1.0 billion ($1.1 billion), as adjusted for the net debt of Ziggo Group Holding and Vodafone NL at the time of closing and certain working capital adjustments. Ziggo Group Holding will be contributed to the Dutch JV together with its outstanding third-party debt, while our Sport1 premium channel and Vodafone’s business in the Netherlands will be contributed on a debt and cash free basis.

The parties expect to raise additional debt financing at the Dutch JV to increase the Dutch JV’s net leverage ratio to a level that ranges between 4.5 and 5 times EBITDA (as calculated pursuant to Ziggo Group Holding’s existing financing arrangements) and to make a pro rata distribution of the net proceeds from the additional debt to our company and Vodafone. The Dutch JV will be required to make regular cash distributions to its shareholders on a pro rata basis equal to the unrestricted cash held by the Dutch JV (subject to the Dutch JV maintaining a minimum amount of cash and complying with the terms of its financing arrangements). As an ongoing operation, it is intended that the Dutch JV will be funded solely from its net cash flow from operations and third-party financing. This transaction will not trigger any of Ziggo Group Holding’s requirements under its debt agreements to redeem its outstanding debt pursuant to applicable change in control provisions.

Following completion of the transaction, we expect to account for our 50% interest in the Dutch JV as an equity method investment, and we expect to attribute our 50% interest in the Dutch JV to the Liberty Global Group. Ziggo Group Holding and Sport1 are not considered to be held-for-sale as of June 30, 2016 due to uncertainty surrounding the regulatory review process. When Ziggo Group Holding and Sport1 are considered held-for-sale or are actually contributed to the Dutch JV, we will not present these entities as discontinued operations as this transaction does not represent a strategic shift for Liberty Global.

The consummation of the transaction contemplated by the Contribution Agreement is subject to certain conditions, including competition clearance by the European Commission. On August 3, 2016, the European Commission approved the transaction subject to the divestment by Vodafone of its fixed-line business in the Netherlands. It is anticipated that the transaction contemplated by the Contribution Agreement will close around the end of 2016. The Contribution Agreement also includes customary termination rights, including a right of the parties to terminate the transaction if it has not closed by August 15, 2017.

2016 Acquisitions

CWC. On May 16, 2016, pursuant to a scheme of arrangement and following shareholder approvals, we acquired CWC for shares of Liberty Global (the CWC Acquisition). Under the terms of the transaction, CWC shareholders received in the aggregate: 31,607,008 Class A Liberty Global Shares, 77,379,774 Class C Liberty Global Shares, 3,648,513 Class A LiLAC Shares and 8,939,316 Class C LiLAC Shares. Further, in accordance with the scheme of arrangement and immediately prior to the acquisition, CWC declared a special cash dividend (the Special Dividend) to its shareholders in the amount of £0.03 ($0.04 at the transaction date) per CWC share. The Special Dividend was paid to CWC shareholders promptly following the closing and the payment, together with fees and expenses related to the acquisition, was funded with CWC liquidity, including incremental debt borrowings, and LiLAC Group corporate liquidity. We acquired CWC in order to achieve certain financial, operational and strategic benefits through the integration of CWC with our existing operations in the LiLAC Group.

The CWC Acquisition triggered regulatory approval requirements in certain jurisdictions in which CWC operates. The regulatory authorities in certain of these jurisdictions, including the Bahamas, Jamaica, Trinidad & Tobago, the Seychelles and the Cayman Islands, have not completed their review of the CWC Acquisition or granted their approval. While we expect to receive all outstanding approvals, such approvals may include binding conditions or requirements that could have an adverse impact on CWC’s operations and financial condition.

For accounting purposes, the CWC Acquisition was treated as the acquisition of CWC by Liberty Global. In this regard, the equity and cash consideration paid to acquire CWC is set forth below (in millions):



Class A Liberty Global Shares (a)	$	1,167.2
Class C Liberty Global Shares (a)	2,803.5
Class A LiLAC Shares (a)	144.1
Class C LiLAC Shares (a)	375.3
Special Dividend (b)	193.8
Total	$	4,683.9

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(a)	Represents the fair value of the 31,607,008 Class A Liberty Global Shares, 77,379,774 Class C Liberty Global Shares, 3,648,513 Class A LiLAC Shares and 8,939,316 Class C LiLAC Shares issued to CWC shareholders in connection with the CWC Acquisition. These amounts are based on the market price per share at closing on May 16, 2016 of $36.93, $36.23, $39.50 and $41.98, respectively.


(b)	Represents the Special Dividend of £0.03 ($0.04 at the transaction date) per CWC share paid pursuant to the scheme of arrangement based on 4,433,222,313 outstanding shares of CWC on May 16, 2016.

We have accounted for the CWC Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of CWC based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. The preliminary opening balance sheet is subject to adjustment based on our final assessment of the fair values of the acquired identifiable assets and liabilities. Most items in the valuation process remain open and are subject to change upon finalization of the valuation process. A summary of the purchase price and the preliminary opening balance sheet of CWC at the May 16, 2016 acquisition date is presented in the following table (in millions):



Cash and cash equivalents	$	210.8
Other current assets	712.0
Property and equipment, net	2,895.7
Goodwill (a)	5,606.5
Intangible assets subject to amortization, net (b)	1,266.3
Other assets, net	428.0
Current portion of debt and capital lease obligations	(94.4		)
Other accrued and current liabilities	(761.0		)
Long-term debt and capital lease obligations	(3,280.8		)
Other long-term liabilities	(847.4		)
Noncontrolling interests (c)	(1,451.8		)
Total purchase price (d)	$	4,683.9

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(a)	The goodwill recognized in connection with the CWC Acquisition is primarily attributable to (i) the ability to take advantage of CWC’s existing advanced broadband communications and sub-sea and terrestrial networks to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of CWC with other operations in the LiLAC Group.


(b)	Amount primarily includes intangible assets related to customer relationships. At May 16, 2016, the preliminary assessment of the weighted average useful life of CWC’s intangible assets was approximately eight years.


(c)	Represents the aggregate fair value of the noncontrolling interests in CWC’s subsidiaries as of May 16, 2016.


(d)	Excludes direct acquisition costs of $116.5 million which are included in impairment, restructuring and other operating items, net, in our condensed consolidated statements of operations.

Following completion of the CWC Acquisition, we attributed CWC to the LiLAC Group, with the Liberty Global Group being granted an inter-group interest in the LiLAC Group representing the fair value (as determined by our board of directors) of the Liberty Global Shares issued as part of the purchase consideration. On July 1, 2016, we distributed (as a bonus issue) 117,425,359 LiLAC Shares to Liberty Global Group shareholders on a pro-rata basis (the LiLAC Distribution), thereby eliminating the Liberty Global Group's inter-group interest in the LiLAC Group. The LiLAC Distribution, which will be accounted for prospectively effective July 1, 2016, has not been reflected in our June 30, 2016 condensed consolidated financial statements.

BASE. On February 11, 2016, pursuant to a definitive agreement and following regulatory approval, Telenet acquired Telenet Group BVBA, formerly known as BASE Company NV (BASE), for a cash purchase price of €1,321.9 million ($1,497.7 million at the transaction date) (the BASE Acquisition). BASE is the third-largest mobile network operator in Belgium. We expect that the BASE Acquisition will provide Telenet with cost-effective long-term mobile access to effectively compete for future growth opportunities in the Belgium mobile market. The BASE Acquisition was funded through a combination of €1.0 billion ($1.1 billion at the transaction date) of new debt facilities and existing liquidity of Telenet. The acquisition was approved by the European Commission subject to Telenet’s agreement to divest both the JIM Mobile prepaid customer base and BASE’s 50% stake in Viking Co NV (Viking) to MEDIALAAN NV. In February 2016, Telenet completed the sale of its stake in Viking. The divestiture of the JIM Mobile prepaid customer base is expected to occur during the third quarter of 2017.

We have accounted for the BASE Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of BASE based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. The preliminary opening balance sheet is subject to adjustment based on our final assessment of the fair values of the acquired identifiable assets and liabilities. Although most items in the valuation process remain open, the items with the highest likelihood of changing upon finalization of the valuation process include property and equipment, goodwill, intangible assets associated with mobile spectrum, customer relationships and trademarks and income taxes. A summary of the purchase price and the preliminary opening balance sheet of BASE at the February 11, 2016 acquisition date is presented in the following table (in millions):



Cash and cash equivalents	$	160.1
Other current assets	176.2
Property and equipment, net	785.8
Goodwill (a)	345.9
Intangible assets subject to amortization, net:
Mobile spectrum (b)	261.0
Customer relationships (c)	127.0
Trademarks (d)	40.7
Other assets, net	10.7
Other accrued and current liabilities	(311.8		)
Other long-term liabilities	(97.9		)
Total purchase price (e)	$	1,497.7

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(a)	The goodwill recognized in connection with the BASE Acquisition is primarily attributable to (i) the ability to take advantage of BASE’s existing mobile network to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of BASE with Telenet.


(b)	As of February 11, 2016, the weighted average useful life of BASE’s mobile spectrum was approximately 11 years.


(c)	As of February 11, 2016, the weighted average useful life of BASE’s customer relationships was approximately six years.


(d)	As of February 11, 2016, the weighted average useful life of BASE’s trademarks was approximately 20 years.


(e)	Excludes direct acquisition costs of $17.1 million, including $7.1 million incurred during 2016, which are included in impairment, restructuring and other operating items, net, in our consolidated statements of operations.

2015 Acquisition

On June 3, 2015, pursuant to a stock purchase agreement with the parent entity of Puerto Rico Cable Acquisition Company Inc., dba Choice Cable TV (Choice) and following regulatory approval, one of our subsidiaries, together with investment funds affiliated with Searchlight Capital Partners, L.P. (collectively, Searchlight), acquired 100% of Choice (the Choice Acquisition). Choice is a cable and broadband services provider in Puerto Rico. We acquired Choice in order to achieve certain financial, operational and strategic benefits through the integration of Choice with Liberty Puerto Rico. The combined business is 60.0%-owned by our company and 40.0%-owned by Searchlight.

The purchase price for Choice of $276.4 million was funded through (i) Liberty Puerto Rico’s incremental debt borrowings, net of discount and fees, of $259.1 million, (ii) cash of $10.5 million and (iii) an equity contribution from Searchlight of $6.8 million.

We have accounted for the Choice Acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets of Choice based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. A summary of the purchase price and opening balance sheet of Choice at the June 3, 2015 acquisition date is presented in the following table. The opening balance sheet presented below reflects our final purchase price allocation (in millions):



Cash and cash equivalents	$	3.6
Other current assets	7.8
Property and equipment, net	79.8
Goodwill (a)	51.6
Intangible assets subject to amortization, net (b)	59.1
Franchise rights	147.8
Other assets, net	0.3
Other accrued and current liabilities	(13.2		)
Non-current deferred tax liabilities	(60.4		)
Total purchase price (c)	$	276.4

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(a)	The goodwill recognized in connection with the Choice Acquisition is primarily attributable to (i) the ability to take advantage of Choice’s existing advanced broadband communications network to gain immediate access to potential customers and (ii) synergies that are expected to be achieved through the integration of Choice with Liberty Puerto Rico.


(b)	Amount primarily includes intangible assets related to customer relationships. As of June 3, 2015, the weighted average useful life of Choice’s intangible assets was approximately ten years.


(c)	Excludes direct acquisition costs of $8.5 million incurred through December 31, 2015, which were included in impairment, restructuring and other operating items, net, in our consolidated statement of operations for the year ended December 31, 2015.

Pro Forma Information

The following unaudited pro forma condensed consolidated operating results give effect to (i) the CWC Acquisition, (ii) the BASE Acquisition and (iii) the Choice Acquisition, as if they had been completed as of January 1, 2015. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable. In the following table, we present the revenue that is attributed to the Liberty Global Group and the LiLAC Group as if such revenue had been attributed to each group at the beginning of each period presented. However, our presentation of net loss and basic and diluted loss per share attributed to (a) Liberty Global Shares, (b) LiLAC Shares and (c) Old Liberty Global Shares only includes the results of operations for the periods during which these shares were outstanding. Accordingly, (1) our net loss attributed to Liberty Global Shares and LiLAC Shares relates to the period from January 1, 2016 through June 30, 2016 and (2) our net loss attributed to Old Liberty Global Shares relates to the period from January 1, 2015 through June 30, 2015.



	Three months ended					Six months ended
	June 30,					June 30,
	2016		2015			2016			2015
	in millions, except per share amounts
Revenue:
Liberty Global Group	$	4,471.2	$	4,424.0		$	8,829.7		$	8,822.7
LiLAC Group	891.8		909.4			1,800.7			1,829.3
Total	$	5,363.0	$	5,333.4		$	10,630.4		$	10,652.0

Net earnings (loss) attributable to Liberty Global shareholders:
Liberty Global Shares	$	204.2	$	—		$	(129.8	)	$	—
LiLAC Shares	21.4		—			131.1			—
Old Liberty Global Shares	—		(516.4		)	—			(1,225.3		)
Total	$	225.6	$	(516.4	)	$	1.3		$	(1,225.3	)

Basic and diluted earnings (loss) attributable to Liberty Global shareholders per share:
Liberty Global Shares:
Basic	$	0.22				$	(0.14	)
Diluted	$	0.21				$	(0.14	)
LiLAC Shares:
Basic	$	0.38				$	2.32
Diluted	$	0.37				$	2.30
Old Liberty Global Shares:
Basic			$	(0.52	)				$	(1.24	)
Diluted			$	(0.52	)				$	(1.24	)

Our condensed consolidated statements of operations for the three and six months ended June 30, 2016 include (i) revenue (after intercompany eliminations) of $285.4 million and net loss of $41.9 million attributable to CWC and (ii) revenue (after intercompany eliminations) of $166.9 million and $256.1 million, respectively, and net loss of $14.3 million and $18.8 million, respectively, attributable to BASE.