Germany’s Kabel Deutschland (KDG) has received a preliminary offer from John Malone’s cable giant Liberty Global (LGI).
The German cableco, which confirmed last week that UK mobile operator Vodafone had approached it about a potential offer for the…
Germany’s Kabel Deutschland (KDG) has received a preliminary offer from John Malone’s cable giant Liberty Global (LGI).
The German cableco, which confirmed last week that UK mobile operator Vodafone had approached it about a potential offer for the company, issued a short statement late yesterday (17 June) responding to “recent speculation” that Liberty had submitted an offer.
As with its statement on Vodafone’s interest, KDG did not disclose details of LGI’s offer, financial or otherwise.
LGI confirmed the accuracy of KDG’s statement, but provided no further details.
The UK’s Financial Times newspaper cited unnamed people familiar with the talks as saying LGI has made an indicative offer of €85 per share, valuing KDG at about €7.5bn.
Last Wednesday’s confirmation of Vodafone’s interest in KDG saw the latter’s share price jump from €77.31 to €80.84 that day, valuing the company at about €7.16bn.
Various media reports have put Vodafone’s indicative offer at €80 to €83 per share, equal to a maximum total of €7.35bn.
The UK operator is reportedly considering improving its offer after KDG indicated its indicative pricing was too low.
Last week, analysts estimated that Vodafone may need to pay 11.2x EBITDA for KDG.
Bernstein Research analysts speculated that the UK operator may end up having to pay €90 per share for KDG, valuing the cableco at €7.97bn.
Speculation mounted last week that LGI, which owns cableco UnityMedia KabelBW in Germany, would challenge Vodafone for KDG.
John Malone has said previously that he considers KDG an attractive asset and, in April, a German weekly reported that LGI, which recently completed its acquisition of the UK’s Virgin Media for US$23.3bn, was working on an offer for the cableco.
People following the situation told TelecomFinance last week that an LGI/KDG combination would be likely to encounter antitrust hurdles.
Earlier this year, Germany’s Federal Cartel Office’s (FCO) blocked KDG’s planned acquisition of smaller rival Tele Columbus, even after remedies were offered, saying it was concerned the deal would reduce competition in regions in which the two operators compete directly.
LGI’s UnityMedia was created by the merger of two of Germany’s largest cablecos at the time but only received antitrust approval when the conglomerate agreed to far-reaching remedies in 2011 after a long and complicated antitrust review.
A telecoms banker who has worked on deals in the German cable industry in the past commented that in his view LGI would be unlikely to be able to offer sufficient remedies to convince the FCO to approve a takeover of KDG.
Warwick Business School assistant professor and telecoms expert Ronald Klingebiel also said a LGI/KDG combination would struggle to secure regulatory approval. However, he said Liberty might be motivated by a desire to drive up the price and slow down the sales process.
Klingebiel said that because a Vodafone and KDG tie-up would not reduce the number of companies owning cable TV networks in Germany, a merger between the two is more likely to get regulatory approval.
Conversely, a Germany-based former cableco executive TelecomFinance spoke with said that while he believes Vodafone is serious about KDG, such a merger could also attract close scrutiny from the antitrust regulator because it would effectively see two major telecoms players join forces.
LGI could argue to the FCO that Unitymedia and KDG compete directly in only a small percentage of local markets, he suggested. Vodafone, on the other hand, is present throughout the country and therefore has a much larger regional overlap with KDG.
