Liberty Global (LBTYA, LBTYB and LBTYK) and Telefonica (TEF) announced an agreement to merge their operating businesses in the U.K. to form a 50:50 joint venture. The combination of Virgin Media and O2 will create a nationwide integrated communications provider with over 46 million video, broadband and mobile subscribers and GBP 11 billion of revenue, the companies said in a statement. The transaction will include a series of recapitalization financings prior to closing to reach its target closing net leverage ratio for the venture of 5.0 times, or approximately GBP 18 billion of long-term debt. Net new proceeds from the recapitalizations are targeted to be approximately GBP 6 billion. After taking into account the recapitalizations, Telefonica is expected to receive GBP 5.7 billion in total proceeds from the transaction. Liberty Global is expected to receive GBP 1.4 billion in total, including approximately GBP 800 million from the recapitalization of its retained and 100% owned Virgin Media Ireland business. The transaction will not trigger a change of control under Virgin Media’s existing third-party debt that will be contributed in full to the joint venture. As part of the transaction, a syndicate of banks has underwritten a GBP 4 billion standalone undrawn financing on the O2 business. The joint is expected to generate operating benefits, with estimated run-rate cost, capex and revenue synergies of GBP 540 million on an annual basis by the fifth full year post closing, equivalent to a net present value of approximately GBP 6.2 billion post tax and net of integration costs, as well as synergies from the accelerated usage of existing tax assets. The transaction is expected to close around the middle of 2021. Executive leadership of the venture will be agreed prior to the closing. The board will consist of eight members, four from each of Liberty Global and Telefonica. Mr. Fries, CEO of Liberty Global, and Mr. Alvarez-Pallette, CEO of Telefonica, will sit on the board. The post of Chairman will be held for alternating two-year periods by Liberty Global or Telefonica with Liberty Global holding the position first.