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Vodafone Is Said to Consider Bid for Kabel Deutschland

February 13, 2013

Vodafone Is Said to Consider Takeover Bid for Kabel Deutschland

Kabel Deutschland rose as much as 11 percent in Frankfurt today after Manager Magazin reported the takeover plan. Source: Kabel Deutschland GmbH via Bloomber

Vodafone Group Plc is considering a bid for Kabel Deutschland Holding AG, Germany’s largest cable provider, to expand in the country’s pay-TV and Internet market, according to a person with knowledge of the matter.

Vodafone hasn’t yet contacted Kabel Deutschland about its intention, said the person, who asked not to be identified because the plan is private. Kabel Deutschland closed 8.8 percent higher in Frankfurt for its steepest increase since the company’s 2010 initial public offering.

Buying Kabel Deutschland, which is based in near Munich and whose market value tops 6 billion euros ($8 billion), would be another step for the world’s second-largest wireless carrier to expand into fixed-line operations. The move would also strengthen Vodafone against Deutsche Telekom AG and Europe’s largest cable provider, Liberty Global Inc. (LBTYA:US), which agreed to buy Britain’s No. 2 cable operator Virgin Media Inc (VMED:US). last week.

“It looks increasingly like we’re in a land-grab phase,” said Andrew Hogley, an analyst at Espirito Santo Investment Bank in London. “Vodafone is thinking, we can’t afford to wait any longer. Would it make strategic sense? Absolutely.”

Kabel Deutschland jumped as high as 72.75 euros today. Vodafone, based in Newbury, England, fell 1.1 percent to close at 171.65 pence in London.

Internal Talks

Vodafone has been discussing the Kabel Deutschland purchase internally and with investment banking advisers, the person said. Vodafone was planning to contact Kabel Deutschland regarding a potential bid next week, the person said.

Matt Morgan, a Vodafone spokesman, and Insa Calsow, a spokeswoman for Kabel Deutschland, declined to comment.

The average premium paid for a cable or television company in the last 12 months is about 33 percent, according to data from completed deals collected by Bloomberg. That would value Kabel Deutschland at 76.19 euros a share, using its average share price in the past three months before today, or about 6.74 billion euros.

Last year, Vodafone acquired Cable & Wireless Worldwide to boost its fixed-line system in the U.K. This week, Vodafone sold $6 billion of bonds in the U.S., the largest dollar-denominated issue in more than three weeks.

Vodafone made a bid for Kabel Deutschland two years ago, people familiar with the matter said, though the company denied it at the time.

Malone’s Expansion

Liberty Global, controlled by billionaire John Malone, agreed to buy Virgin Media for $16 billion in cash and stock, a 24 percent premium, valuing the British cable company at $23.3 billion including debt. The acquisition is the largest media transaction since 2007 and the price represented about 8.8 times Virgin Media’s 2012 cash flow.

Portuguese mobile carrier Sonaecom SGPS SA agreed in December to merge its Optimus unit with Zon Multimedia SGPS SA, Portugal’s biggest cable-television provider. Other publicly traded cable assets include the Netherlands-based Ziggo NV, which jumped as much as 7.5 percent today.

Deals involving telecommunications and media companies fetched more than $57 billion so far this year, according to data compiled by Bloomberg.

Other Offers?

Kabel Deutschland provides television, Internet and phone services to more than 8 million households on networks inherited from former monopoly Deutsche Telekom. The move would intensify the rivalry between Vodafone and its German peer in the fixed- line market, while the two companies also battle for the top spot among wireless providers in the country.

Vodafone has about 3.2 million fixed-line Internet customers in Germany, some of which it could migrate to Kabel Deutschland’s network. If the deal is approved by competition watchdogs, Vodafone could also offer television, Internet and fixed-line phone services to its mobile customers and avoid paying rental fees on copper lines to Deutsche Telekom.

Telefonica Deutschland Holding AG also offers fixed broadband access in Germany.

A potential counterbid for Kabel Deutschland could come from Liberty Global, which already owns Unitymedia KabelBW, the second-largest cable provider in Germany, Hogley said. Unitymedia KabelBW covers different regions in Germany than Kabel Deutschland, potentially making regulatory approval easier than for Vodafone, he added. Liberty Global representatives in the U.S. didn’t immediately return a call seeking comment.

During Kabel Deutschland’s initial public offering in 2010, the German company also attracted bids from BC Partners Ltd., CVC Capital Partners Ltd. and Bain Capital LLC, people familiar with the matter said at the time.

Jens Schulte-Bockum, the head of Vodafone’s German unit, and strategy chief Warren Finegold have prepared a business plan for the acquisition which Chief Executive Officer Vittorio Colao would need to approve, Manager Magazin reported today. Colao favors a takeover, the German magazine said.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net; Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • LBTYA
    (Liberty Global PLC)
    • $43.59 USD
    • -0.77
    • -1.77%
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