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Market Update

European Markets Await ECB Decision, Spanish Bond Auction

Author: Barry Randall
Last Update: 10:08 AM ET February 06 2013

4:00 PM Frankfurt – European markets traded cautious ahead of the European Central Bank meeting and closely watched Spanish bond auction tomorrow that may raise as much as €4.5 billion. RBS agreed to pay the second largest fine linked to the Libor probe. Liberty Global agreed to acquire Virgin Media for $16 billion.

European markets traded cautious ahead of the European Central Bank meeting tomorrow and Spanish bond auction that may raise as much as €4.5 billion.

In London trading FTSE 100 index decreased 0.5 to 6,282 and in Frankfurt the DAX index dropped 1.3% or 103 to 7.562. In Paris, CAC 40 index decreased 1.3% or 47.6 to 3,647.

Market indexes in Madrid were volatile in lighter than average daily trading volume and fell 0.5% ahead of bond auction tomorrow. The treasury is expected to raise as much as €4.5 billion in bond maturing between 3 years and 16 years.

Markets in Milan were jittery and declined 0.7% again as the election rhetoric ratchets up and former Prime Minister Silvio Berlusconi appeared to gain popularity on the promise of dismantling several recent financial reforms including the real estate tax of €4 billion.

Liberty Global to Acquire Virgin Media in $16 B Deal

Liberty Global Inc agreed to acquire U.K. cable television services provider Virgin Media Inc for $16 billion in cash and stock. Including the debt, the deal is valued at $23.3 billion.

The deal between the two companies values second largest cable operator at $47.87 a share, or 24% premium to February 4 closing price.

The statements released by the companies noted Liberty agreed to pay 8.8 times 2012 operating cash flow of Virgin Media and 7 times 2013 projected cash flow. Virgin Media shareholders will control 36% of combined company and 26% of voting rights.

Liberty Global will assume more debt to fund $5.9 billion of cash and increase debt of Virgin Media by $3 billion.

After the deal, Englewood, Colorado based Liberty will service 20 million customers with Internet, phone and pay-TV service and more than 18 million are located in Germany, France, UK and Belgium.

Virgin Media has about 4.9 million customers and is the second largest in the UK cable market following BSkyB’s 10.7 million. Virgin was created after the merger between Telewest and NTL and mobile telecom operator Virgin Media in 2006.

Richard Branson controls 3% of the Virgin Media and the company has been at odds with BSkyB and focused on offering high speed Internet access which Liberty is expected expand.

Stocks in Review

Banks across the currency zone were under pressure.

Intesa Sanpaolo declined 2.5%, Commerzbank fell 1.4% and UniCredit decreased 2.4%.

Royal Bank of Scotland Group Plc increased 1.30 pence to 338.9 pence after the U.K. based largest lender agreed to fines to the U.S. and UK regulators totaling $612 million and avoided criminal penalties.

The bank will pay $325 million in fines to U.S. Commodity Futures and Trading Commission, $150 million to the Department of Justice and 87.5 million pounds to the Financial Services Authority, the U.K. financial regulators.

The Libor investigation has been slowly grinding and RBS has paid the second largest fine after the $1.5 billion paid by the Switzerland based UBS AG in December. Barclays agreed to pay 290 million pounds in fine in June of 2012.

RBS, 81% controlled by the U.K. government, said it will recoup $300 million from bonuses that are subject to claw-backs.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc