Less than a month after Virgin Media announced that it was putting its plans to sell the company on hold, CEO Steve Burch abruptly resigned on Aug. 21.
Burch's resignation was effective immediately according to a Virgin Media press release, which cited personal and family reasons for the departure. Burch will also resign from Virgin's board of directors.
According to documents filed with the Securities and Exchange Commission Aug. 21, Burch will receive about 250,000 shares of restricted Virgin stock — the amount that had vested from a previous award of 1.125 million shares — and a severance payment of $1.5 million (twice his annual salary).
NON-COMPETE CLAUSE
The severance package does not prohibit Burch from working for a competitor, but according to the filing Burch cannot take a job where his duties include management or supervision of a business unit that competes directly with Virgin's core business, or one that gets at least 25% of its revenue from operations in the United Kingdom or Ireland.
Burch was a 17-year veteran of Comcast — most recently serving as president of the operator's Atlantic division — before he joined Virgin in January 2006.
News of his abrupt departure sent Virgin shares down about 54 cents each to $22.25 per share in early trading Aug. 21. The stock finished the day down 34 cents each to $22.45 per share.
Virgin has been on the block since it received an unsolicited offer of about $23 billion in July from private equity giant The Carlyle Group.
Other private equity firms, such as Providence Equity Partners, and strategic players like Comcast and Liberty Media have also shown interest in the company, according to several published reports. While the company has said that it is exploring strategic alternatives, including a sale, it said in a statement on Aug. 7 that it was putting that review on hold in light of the downturn in the credit markets.
Virgin said in a statement that Burch will be replaced in the interim by chief operating officer Neil Burkett. The company said that the search for a permanent replacement for Burch will begin shortly.
“Steve has contributed significantly to the transformation of Virgin Media,” Virgin chairman James Mooney said in a statement. “Since he joined us, the company has emerged as the UK's only 'quad play' provider and a genuinely distinctive presence in the world of communications and entertainment. On behalf of Virgin Media's board of directors, I thank him for his contribution to our development and wish him every success for the future.”
In a research report, Oppenheimer & Co. analyst Tom Eagan wrote that while Burch's departure is a blow, he said it should have no impact on the company eventually being sold to a private equity player.
Eagan also was optimistic that the turnaround in fundamentals at the company is on track and expects that Virgin's roll out of new services and repricing of existing bundles should improve customer growth in the third and fourth quarters.
“Although true that Mr. Burch's departure comes at a particularly unfortunate time for [Virgin] given their heightened battle for market share and their quest for merger synergies, we believe that interim CEO Neil Berkett will be able to execute plans already in place,” Eagan wrote.
Virgin, which completed a merger with U.K. cable company Telewest last year, has hit some rough spots over the past few quarters. After a disappointing first quarter during which it was locked in a contentious battle over programming with British Sky Broadcasting — a fight that continues to this day — and lost about 47,000 on-net customers, one of Virgin's largest institutional shareholders said it was interested in meeting with management to discuss its strategic direction.
That shareholder, Franklin Mutual Advisors — which owns 9.4% of Virgin stock — said in an SEC filing in May that in light of the bad quarter it may initiate discussions with Virgin “regarding among other things, the Issuer's strategic direction, corporate governance and management, and to communicate from time to time with the Issuer's executive management and board of directors and with other holders of the Common Stock regarding such matters.”
UNSOLICITED OFFER
Two months later, on July 2, Virgin said in an SEC filing that it had received an unsolicited offer from an unidentified suitor and was exploring its alternatives.
The second quarter didn't do much to boost investor hopes — revenue of 995 million pounds ($1.995 billion) was down from first quarter sales of 1.1 billion pounds ($2.2 billion), mainly due lower average revenue per unit and the decline of 70,000 customers — but the company tried to put a positive spin on its conference call with analysts, telling participants that it expected more robust results in the second half of the year.
