LONDON (Brand Republic) – The proposed $5.6bn merger between the UPC-owned high-speed cable internet service Chello Broadband and US ISP Excite@Home has been aborted.
The deal is understood to have been called after the two failed to agree on a number of funding issues and the management structure of the new company. Market conditions were also said to be a factor.
The venture, to be called Excite Chello, would have been the largest broadband cable internet service provider outside the US, serving some 300,000 customers, mostly in Europe. It planned to operate in 15 countries and employ 1000 staff.
The deal was announced on July 18 and Chello’s planned IPO was called off. The new company had been expected to float on the stock market by the end of the year.
Under the agreement Chello and Excite@Home would have each paid $88.1m (€100m) for a 43% stake. Liberty Media, a UPC shareholder would have invested $176.3m (€200m) in the form of a convertible bond issue in exchange for a 5% stake.
Since the deal was announced, Excite@Home shares slid 70% while UPC’s lost 61%. Excite@Home shares climbed 25 cents to $6.13 after the deal was called off. UPC’s share price lost 11%, closing at $9.96 on the news.
UPC will have to include Chello’s losses in its results now the joint venture has been abandoned. The pan-European cable operator is also expected to lose the E100m it planned to invest in the business although it may still receive some funding from Liberty Media, which is still backing Chello.