US cable operator Liberty Global Inc yesterday agreed to buy UK's second-biggest pay-TV operator Virgin Media in a $15.75-billion stock and cash deal, a move that would pit it against media mogul Rupert Murdoch's BskyB.

Including debt, the deal is valued more than $23 billion.

Under the terms of the deal, Virgin Media shareholders will receive $17.50 in cash, 0.2582 Liberty Global class A shares and 0.1928 Liberty Global class C shares for each Virgin Media share.

Based on yesterday's closing prices for those shares, each Virgin Media share is valued at $47.02, a premium of 24-per cent to Virgin Media's closing price on Monday, and is slightly higher than Tuesday's closing price of $45.61, when Financial Times broke the story on the potential deal. (See: US cable operator Liberty Global planning to bid for Virgin Media: report)

As a result of the proposed acquisition, Virgin Media shareholders will own 36 per cent of Liberty Global's outstanding shares with 26 per cent of the voting rights.

The combined company generated $16.8 billion in revenue in 2012 and operating cash flow of $7.5 billion.

Liberty said that it expects about $180 million in annual cost savings after integrating the operations of the two companies, with synergies coming from areas like network and IT and procurement.

''After the deal, roughly 80 per cent of Liberty Global's revenue will come from just five attractive and strong countries - the UK, Germany, Belgium, Switzerland and the Netherlands,'' said Mike Fries, Liberty Global's president and CEO in a statement.

Liberty Global said that the deal would create one of the world's leading broadband communications company, covering 47 million homes and serving 25 million customers across 14 countries.

As part of its acquisition, Liberty Global said that it will relocate to the UK by becoming a subsidiary of a new British holding company. Liberty Global's current headquarters will be in place and continue to be listed on the Nasdaq Stock Exchange. Virgin Media will continue to operate under the Virgin Media brand in the UK.

After the close of the transaction, Liberty Global said that it may look at an European listing.

Formed in 2006 through the merger of NTL and Telewest, Virgin Media is the UK's second-largest pay television operator  with 4.9 million customers. It also provides fixed and mobile telephone, and broadband internet services.

The company,  in which Sir Richard Branson holds a 3 per cent stake, is listed on the Nasdaq Stock Market and has a secondary listing in the London Stock Exchange.

The proposed deal will pit Colorado-based Liberty Global, run by US billionaire John Malone, directly with with Murdoch's BskyB, the UK's biggest pay television operator, which has 10.7million customers.

Virgin Media also competes with BT Group, EE, O2, TalkTalk and Vodafone, and had posted operating income of £75 million in 2011 on revenues of £3.99 billion. The  Hampshire-based company is burdened with debts of £5.7 billion and only made its first profit in 2011.

A completed deal will pit Malone, chairman of Liberty Global with nearly 35-per cent stake, against his former business partner and rival Murdoch, chairman of News Corp and BSkyB's biggest shareholder, with a 39 per cent stake.

Liberty Global, formed through the 2005 merger of Liberty Media and UnitedGlobalCom, operates in 13 countries in Europe, and is the largest cable operator in Poland, Switzerland, Belgium, Austria, Slovakia, Hungary and Czech Republic.

Liberty Global's consumer brands include UPC, Unitymedia, Kabel BW, Telenet and VTR. It also has a 50-per cent stake in MGM Networks in the US through Europe-based Chellomedia.

Eighty per cent of its revenue comes from Europe, of which, two-thirds comes from four countries, Belgium, the Netherlands, Switzerland and Germany.

Last year it fully acquired Belgian peer Telenet Group Holding NV for $2.56 billion. In terms of revenues, Telenet is Liberty's second largest business after its European division UPC. With 18.4 million customers, Europe is Liberty's biggest market.