Vodafone has sealed its €7.7bn (US$10.44bn) public takeover tender for Kabel Deutschland (KDG) and now holds 76.57% of the German cableco’s shares.
In a statement today, UK-based Vodafone also reiterated that it intends to enter into a domination…
Vodafone has sealed its €7.7bn (US$10.44bn) public takeover tender for Kabel Deutschland (KDG) and now holds 76.57% of the German cableco’s shares.
In a statement today, UK-based Vodafone also reiterated that it intends to enter into a domination and profit-and-loss transfer agreement with KDG, adding that they have already begun talks on the matter.
Announced in June, the deal secured clearance from the European Commission (EC) in September.
Combining Germany’s second-largest mobile operator with the country’s largest cableco, the merged entity is set to pose stiff competition to rival operators, including incumbent Deutsche Telekom and cable giant Liberty Global’s local unit UPC Germany.
The acquisition forms part of Vodafone’s strategy to offer a broader range of integrated services. The operator has said it aims to leverage KDG’s high-speed broadband and TV capabilities to create a “leading integrated operator” in Germany with pro forma revenues of about €11.5bn (US$15.5bn).
Vodafone offered €84.50 (US$114.58) per KDG share, to be upped to €87 (US$118) if settlement took place before KDG shareholders met to resolve on the proposed €2.50 (US$3.40) per share dividend for the last financial year.
At the time of writing, KDG’s shares were up 0.41% to €91.22 (US$123.67) each.
Last week, KDG announced that the deal will negatively impact its net income by about €205m (US$277.95m) this fiscal year.
“The biggest portion relates to the loss of deferred tax assets which are either at risk due to change-of-control regulations or no longer effective after completion of the intended domination profit and loss transfer agreement with Vodafone,” the cableco said.
KDG is also set to incur significant financing costs. Change-of-control provisions in the cableco’s existing loan agreements mean it will need to prepay its entire senior credit facilities, totalling €2.07bn (US$2.81bn). Outstanding commitments of €324m (US$439.38m) under revolving credit facilities will also be terminated.
To replace these facilities, KDG has agreed with Vodafone a new €2.15bn (US$2.92bn) credit facility maturing in June 2020 and a new €300m (US$406.82m) revolving credit facility due March 2019. These new unsecured facilities will bear a margin of 275bps over Euribor.
In light of Vodafone’s takeover and its implied negative effect on net income, KDG said it cannot currently give any guidance on shareholder return for FY 2013/2014.
“The company will consider and decide on a potential new distribution proposal for this fiscal year at a later point in time.”
KDG’s guidance for its adjusted EBITDA margin, capex and leverage for the year remains unchanged.
KDG chairman to step down
Tony Ball, the chairman of KDG’s supervisory board, has announced he intends to step down from the position today.
In an interview with the Sunday Telegraph, Ball, who has held the position with KDG since 2005, said he is unlikely to take on another such role but added he would like “to do another Kabel-style turnaround”.
A former CEO of the UK’s BSkyB, Ball is also a non-executive director of the BT Group and Spanish cableco Ono, a senior adviser to private equity firm Providence, and chair of the public advisory board of PR firm Portland.
Ball described KDG as an “absolute poster child for how private equity investment can be done and can be good for everybody”.
Describing the cableco as a “boring company” when he arrived, Ball explained that a major restructuring and €1.5bn investment in network development led to annual double-digit growth in broadband subscriptions.
He noted that Vodafone is the first mobile operator in Germany to make such a big acquisition in the fixed-line telecoms segment, adding that the deal could serve as a model for other markets.
Following closure of the deal, the KDG management team is set to take charge of Vodafone’s fixed-line business in Germany.
