Virgin Media has accepted a $23.3bn (£15bn) takeover by American cable tycoon John Malone's Liberty Global in a deal that threatens to topple Rupert Murdoch's dominance of pay television by creating Europe's largest broadband business.

The new company will have its headquarters in the UK, and serve 25 million customers in 14 countries including Germany, Belgium, Switzerland and the Netherlands. Virgin will retain its brand, but the chief executive, Neil Berkett, will step down when the merger concludes.

Malone's timing, and the decision to relocate to London, may have been prompted by Virgin's announcement that it is to use £2.6bn of losses to reduce its corporation tax bill.

The many regional cable businesses which came together into Virgin Media invested an estimated £13bn over two loss-making decades, and Virgin has calculated it could use a portion of those losses to avoid paying any corporation tax for a period.

The cash and shares offer, announced as the London Stock Exchange opened on Wednesday, values Virgin at $47.87 per share, reflecting a 24% premium to the closing price on Monday before news of the deal emerged. Virgin investors will receive $17.50 in cash and own 36% of Liberty's shares once the deal is complete.

In acquiring Virgin, Malone is fulfilling a decade-long ambition, which began with an attempt to end years of losses in the UK cable business by merging the two dominant players, NTL and Telewest. His attempt failed, but the two companies eventually merged under their own steam to form Virgin Media, with the company reporting its first profit last year.

Berkett said the combined company would be a "powerful and disruptive challenger to incumbent operators and a distinctive voice in the ongoing policy debate".

Confirmation of the deal came as Virgin reported annual results for 2012, with pre-tax profits a little below forecasts at £261m and revenues in line with expectations, with a 2.7% increase to £4.1bn. Virgin added 42,700 customers to its network in the December quarter, and 59,900 pay TV customers.

Liberty said it would transfer its headquarters from Delaware to the UK by forming a British plc, and that it "may look to implement a European listing".

"Virgin Media will add significant scale and a first-class management team in Europe's largest and most dynamic media and communications market. After the deal, roughly 80% 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, chief executive of Liberty.

He brushed aside speculation that Liberty might bid for sports rights or consider buying a content producer such as ITV, saying: "We don't see any reason why Virgin Media needs to compete with Sky for that premium content."

Liberty will boost investment in the speed of Virgin's fibre-optic network, but is unlikely to seek a major expansion to its UK footprint, which covers 13m homes and serves nearly 5 million customers.

Its European operations, however, will expand their activities in business telecoms and mobile phones, by using Virgin's expertise in these areas. The company acquired its name through a merger with Sir Richard Branson's Virgin Mobile and still pays the British entrepreneur £10m a year in licence fees.