The companies announced the deal late last night, following Virgin Media’s confirmation yesterday that it had been approached by John Malone’s Liberty Global.
The deal will give Liberty entry to one of Europe’s biggest and most competitive telecom markets.
The merger, subject to shareholder and regulatory approval, will put Liberty in a strong position to challenge Murdoch as cable groups start to assert their authority over traditional telecoms firms with the offer of super-fast broadband and pay-television.
"Virgin Media will add significant scale and a first-class management team in Europe's largest and most dynamic media and communications market," said Mike Fries, president and chief executive of Liberty Global.
"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."
Under the terms of the transaction, 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 share they hold.