July 2 (Bloomberg) -- Carlyle Group approached Virgin Media Inc., the U.K.'s second-biggest pay-TV operator, about a potential $10.8 billion takeover bid, two people with knowledge of the discussions said.

The Washington-based buyout firm made an indicative offer of about $33 a share, one of the people said. The bid for Hook, England-based Virgin Media is 35 percent above the closing price on June 29. The talks are at an early stage, said the people, who declined to be identified because the discussions are secret.

The bid comes almost a year after a group led by Providence Equity Partners Inc. attempted to buy the company, then known as NTL Inc., for more than $8 billion. That group may make a rival offer, the people said. Billionaire Richard Branson's Virgin Group owns about 6.5 percent of Virgin Media, which faces growing competition from British Sky Broadcasting Group Plc and BT Group Plc in selling combined TV, Internet and phone services.

``With Virgin Media there is no growth story,'' said David Thomson, an analyst at Bryan Garnier & Co. in London. Private equity firms would be interested in making ``functional improvements in the operations. The cash-flow is reasonable.''

Emma Thorpe, a spokeswoman for Carlyle in London, declined to comment today, as did Nick Fox, a spokesman for Virgin Media at London-based M: Communications. Branson hasn't been informed of any bid, Virgin Group spokesman Will Whitehorn told Bloomberg today. Carlyle's approach was reported by the London-based Times newspaper June 30.

Shares Jump

Goldman Sachs Group Inc. is advising Virgin Media. If completed, the leveraged buyout would be the second-biggest of a U.K. company.

Virgin Media shares, which are listed on the Nasdaq Stock Market in the U.S., rose $3.77, or 15 percent, to $28.14 at 9:33 a.m. in New York.

Virgin Media in May posted its seventh consecutive quarterly loss as subscribers continued to defect to BSkyB, the U.K.'s largest pay-TV operator. The company was created when NTL bought Branson's Virgin Mobile Holdings Plc in July 2006. NTL had paid $6 billion for Telewest Global Inc., Britain's No. 2 cable operator, four months earlier.

Credit-default swaps based on the company's debt rose 20,000 euros to 430,000 euros today, according to JPMorgan Chase & Co prices. Credit-default swaps are used to speculate on a company's ability to repay debts. A rise indicates worsening perceptions of credit quality.

Record Year

Before today, Virgin Media shares had dropped 18 percent since the Virgin Mobile takeover was announced. Virgin Media had 6.13 billion pounds ($12.33 billion) in debt as of March 31, the company said in May.

Carlyle, led by David Rubenstein, has announced almost $22.3 billion of takeovers in the past month. The firm agreed to buy U.S. nursing-home operator Manor Care Inc. for $6.3 billion today.

Last week, Carlyle teamed up with Canada's Onex Corp. to acquire General Motors Corp.'s Allison Transmission unit for $5.6 billion. The week before, the firm was part of a group that agreed to buy Home Depot Inc.'s contractor-supplies unit for $10.3 billion.

In all, buyout firms have announced a record $555 billion of takeovers so far this year, according to data compiled by Bloomberg. With that has come increased political scrutiny: Carlyle was one of four firms that were summoned last month to defend their industry in front of a panel of British lawmakers.

A takeover of Virgin Media would be the biggest of a cable television company in Europe, and the second-biggest of a British company after Kohlberg Kravis Roberts & Co.'s 11.1 billion-pound takeover of Alliance Boots Plc last month, according to data compiled by Bloomberg.

Convergence

Virgin Media and BSkyB are in a dispute over the distribution of BSkyB's channels. In March, BSkyB's channels were dropped from Virgin Media's cable system over the carriage agreement. In April, Virgin Media sued BSkyB, saying BSkyB exploited its dominant position to set unfair and high rates.

Buyout firms are scouring Europe's cable TV industry as operators add channels or expand their broadband and telephone services. A takeover of Virgin Media would top Warburg Pincus LLC and Cinven Ltd.'s 2.6 billion-euro purchase ($3.5 billion) of Kabelcom, a Dutch cable-television company, last year.

``A deal is in the right area that people are talking about,'' Bryan Garnier's Thomson said. Virgin Media's strategy is ``the convergence of media and telecom.''

To contact the reporters on this story: Edward Evans in London at eevans3@bloomberg.net; Alex Armitage in London at aarmitage@bloomberg.net

Last Updated: July 2, 2007 09:37 EDT