Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2019

Acquisitions and Dispositions [Abstract]

Pending Dispositions

Vodafone Disposal Group. On May 9, 2018, we reached an agreement (the Vodafone Agreement) to sell our operations in Germany, Romania, Hungary and the Czech Republic to Vodafone. The cash proceeds that we receive from the transaction will be calculated on the basis of the agreed enterprise value adjusted for the net debt and working capital of such businesses as of the closing date of the transaction, as well as other post-closing adjustments. Based on the net debt and working capital of such businesses as of December 31, 2017, the cash proceeds would be approximately €10.6 billion ($11.9 billion). The operations of Germany, Romania, Hungary and the Czech Republic are collectively referred to herein as the “Vodafone Disposal Group.”

Closing of the transaction is subject to various conditions, including regulatory approval, which we expect will be obtained during the summer of 2019. The Vodafone Agreement contains certain termination rights for both our company and Vodafone, including if closing has not occurred by November 9, 2019, or May 9, 2020 in certain limited circumstances. If the Vodafone Agreement terminates because the condition to obtain antitrust approval is not met, Vodafone has agreed to pay us a compensatory payment of €250.0 million ($280.5 million). Pursuant to the Vodafone Agreement, our company will retain all cash generated from the Vodafone Disposal Group through the closing of the transaction.

In connection with the sale of the Vodafone Disposal Group, we have agreed to provide certain transitional services for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by Vodafone.

UPC Switzerland. On February 27, 2019, we entered into an agreement to sell UPC Switzerland to Sunrise Communications Group AG (“Sunrise”) for a total enterprise value of $6.3 billion (equivalent at the agreement date). Sunrise will acquire UPC Switzerland and certain holding companies within the UPC Holding borrowing group inclusive of the UPC Holding borrowing group’s existing senior and senior secured notes (together, the UPC Notes), associated derivatives and certain other debt items, which, based on December 31, 2018 outstanding balances, had an aggregate value equal to approximately $3.7 billion (equivalent at the agreement date). The net cash proceeds are expected to be $2.6 billion (equivalent at the agreement date), subject to customary other liabilities and working capital adjustments at completion, and are expected to be used for general corporate purposes.

As the transaction is structured, a change of control will not be triggered under the UPC Notes. UPC Facility AR under the UPC Holding Bank Facility, which had an outstanding balance at March 31, 2019 of $1,645.0 million, is expected to be repaid in full at or prior to closing.

Closing of the transaction is subject to regulatory approval, which is expected prior to year-end 2019, and approval by Sunrise’s shareholders with respect to an associated capital increase. The criteria for presenting UPC Switzerland as a discontinued operation will not be met until such shareholder approval is obtained by Sunrise. Accordingly, UPC Switzerland continues to be included in our continuing operations.

In connection with the agreement to sell UPC Switzerland, we have agreed to provide certain transitional services to Sunrise for a period of up to five years. These services principally comprise network and information technology-related functions. The annual charges for such transitional services will depend on the actual level of transitional services required by Sunrise.

Completed Dispositions

UPC Austria. On July 31, 2018, we completed the sale of our Austrian operations, “UPC Austria,” to Deutsche Telekom AG (Deutsche Telekom). In connection with the sale of UPC Austria, we have agreed to provide certain transitional services to Deutsche Telekom for a period of up to four years. These services principally comprise network and information technology-related functions. During the three months ended March 31, 2019, we recorded revenue of $11.2 million associated with these transitional services.

UPC DTH. On May 2, 2019, we completed the sale of UPC DTH to M7 Group (M7). After considering debt and working capital adjustments, we received net cash proceeds of €134.2 million ($149.9 million at the transaction date). The proceeds from the sale of UPC DTH are expected to be used for general corporate purposes.

In connection with the sale of UPC DTH, we have agreed to provide certain transitional services to M7 for a period of up to two years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by the purchaser.

Presentation of Discontinued Operations

The operations of the Vodafone Disposal Group, UPC Austria and UPC DTH are presented as discontinued operations in our condensed consolidated financial statements for all periods. In connection with the signing of each respective sale agreement, we ceased to depreciate or amortize the long-lived assets of (i) UPC Austria on December 22, 2017, (ii) the Vodafone Disposal Group on May 9, 2018 and (iii) UPC DTH on December 21, 2018. Our operations in Romania, Hungary and the Czech Republic are held through UPC Holding, as were UPC Austria and the operations of UPC DTH prior to their respective disposal dates. No debt, interest expense or derivative instruments of the UPC Holding borrowing group, other than with respect to certain borrowings that are direct obligations of the entities to be disposed, has been allocated to discontinued operations. Conversely, all of Unitymedia’s debt, interest expense and derivative instruments are included in discontinued operations as its debt and derivative instruments are direct obligations of entities within the Vodafone Disposal Group. A portion of the proceeds from the disposition of UPC Austria was used to reduce the outstanding debt of the UPC Holding borrowing group.

The carrying amounts of the major classes of assets and liabilities of the Vodafone Disposal Group and UPC DTH as of March 31, 2019 are summarized below. These amounts exclude intercompany assets and liabilities that are eliminated within our condensed consolidated balance sheet.



	Vodafone Disposal Group		UPC DTH		Total
	in millions
Assets:
Current assets other than cash	$	404.3	$	7.8	$	412.1
Property and equipment, net	5,688.6		80.9		5,769.5
Goodwill	3,903.5		—		3,903.5
Other assets, net	879.3		7.2		886.5
Total assets	$	10,875.7	$	95.9	$	10,971.6

Liabilities:
Current portion of debt and finance lease obligations	$	848.5	$	12.2	$	860.7
Other accrued and current liabilities	1,190.1		31.6		1,221.7
Long-term debt and finance lease obligations	8,919.1		35.1		8,954.2
Other long-term liabilities	1,363.8		0.3		1,364.1
Total liabilities	$	12,321.5	$	79.2	$	12,400.7

The carrying amounts of the major classes of assets and liabilities of the Vodafone Disposal Group and UPC DTH as of December 31, 2018 are summarized below. These amounts exclude intercompany assets and liabilities that are eliminated within our condensed consolidated balance sheet.



	Vodafone Disposal Group		UPC DTH		Total
	in millions
Assets:
Current assets other than cash	$	348.0	$	8.5	$	356.5
Property and equipment, net	5,591.4		79.7		5,671.1
Goodwill	3,986.7		—		3,986.7
Other assets, net	509.4		7.4		516.8
Total assets	$	10,435.5	$	95.6	$	10,531.1

Liabilities:
Current portion of debt and finance lease obligations	$	809.0	$	11.2	$	820.2
Other accrued and current liabilities	1,114.8		32.5		1,147.3
Long-term debt and finance lease obligations	9,037.1		37.5		9,074.6
Other long-term liabilities	997.5		0.3		997.8
Total liabilities	$	11,958.4	$	81.5	$	12,039.9

The operating results of UPC Austria, the Vodafone Disposal Group and UPC DTH for the periods indicated are summarized in the following tables. These amounts exclude intercompany revenue and expenses that are eliminated within our condensed consolidated statement of operations.



	Vodafone Disposal Group			UPC DTH		Total
	in millions
Three months ended March 31, 2019
Revenue	$	858.7		$	27.7	$	886.4
Operating income	$	495.5		$	8.6	$	504.1

Earnings before income taxes	$	432.1		$	7.3	$	439.4
Income tax expense	(116.8		)	—		(116.8		)
Net earnings	$	315.3		$	7.3	$	322.6
Net earnings attributable to Liberty Global shareholders	$	315.3		$	7.3	$	322.6



	UPC Austria			Vodafone Disposal Group			UPC DTH		Total
	in millions
Three months ended March 31, 2018
Revenue	$	109.4		$	952.2		$	31.0	$	1,092.6
Operating income	$	61.2		$	311.5		$	2.8	$	375.5

Earnings before income taxes	$	61.1		$	181.5		$	2.1	$	244.7
Income tax expense	(9.5		)	(46.6		)	—		(56.1		)
Net earnings	51.6			134.9			2.1		188.6
Net earnings attributable to noncontrolling interests	(1.8		)	—			—		(1.8		)
Net earnings attributable to Liberty Global shareholders	$	49.8		$	134.9		$	2.1	$	186.8

Our basic and diluted earnings from discontinued operations attributable to Liberty Global shareholders per share for the three months ended March 31, 2019 and 2018 is presented below. These amounts relate to the operations of the Vodafone Disposal Group, UPC DTH and, for the 2018 period, UPC Austria.



	Three months ended
	March 31,
	2019		2018

Basic and diluted earnings from discontinued operations attributable to Liberty Global shareholders per share	$	0.43	$	0.23