British cable operator Virgin Media said on Monday it had received a bid approach from an unnamed group, which sources familiar with the situation told Reuters was U.S. private equity firm Carlyle Group.
Virgin Media's Nasdaq-listed shares surged almost 20 percent to $28.88, giving the group a market capitalization of $9.4 billion. Analysts said an offer could be pitched between $30 and $35 per share and draw other bidders into an auction.
Virgin Media said in a statement it had already started a review of its strategic options, including a sale of the group, and the proposal would be considered as part of that process.
It said it had not yet engaged in negotiations and the proposal, which has a number of conditions, also stated it would be withdrawn if its terms were publicly disclosed.
The proposal is based on public information and is subject to various conditions, including a due diligence examination and a period of exclusivity, the company said.
Sources familiar with the situation told Reuters on Sunday the Carlyle Group had approached Virgin Media over a possible bid but declined to disclose the price put forward.
The group has appointed Goldman Sachs to seek a possible bidder and consider the options.
Virgin Media, which sells cable television, telephone, Internet and mobile phone services, was formed from the merger of cable operators NTL and Telewest and Virgin's mobile phone division.
Despite a high-profile launch led by its biggest shareholder Richard Branson, the cable group has struggled partly because of a public spat with satellite television and rival group BSkyB over how much the two groups pay each other to carry their channels.
The row has resulted in BSkyB pulling its basic offering from the cable platform and Virgin Media launching legal action.
The group is also fighting competition from new outlets such as the BT Vision broadband TV service from BT Group, the popular multi-channel, free-to-air Freeview digital platform and Internet Service Provider Tiscali's online TV offering.
Last week, BSkyB said it had agreed to provide its basic channels, which show such popular programming as Lost and 24, to Tiscali.
The BSkyB dispute also prompted fund manager and key shareholder Franklin Mutual Advisers to warn it was concerned about the cable group's strategic direction after Virgin Media said it could lose TV customers over the row.
Virgin has since updated the market by saying TV net additions would be roughly flat in the second quarter.
Analysts say a private equity firm could operate the company more efficiently, out of the limelight of quarterly results. Analysts at UBS said in a note to clients private equity ownership could result in a change of strategy with reduced investment.
Any leveraged buyout would rely heavily on tax benefits and is likely to tap into Virgin Media's more than 12 billion pounds ($24.13 billion) of unclaimed capital allowances, analysts say, which could be used to offset the profits from another UK company housed in the same group.
A private equity consortium approached NTL-Telewest about a potential takeover last year but the mooted price of $32 a share was considered too low.
Media reports at the time also suggested that major shareholder W.R. Huff Asset Management did not support a private equity bid but Huff has since reduced its stake in Virgin Media and reduced the number of board seats it holds.
(Additional reporting by Jeffrey Goldfarb)