Vodafone Group Plc (VOD) raised its preliminary offer to buy Kabel Deutschland Holding AG to about 7.5 billion euros ($10 billion) to persuade Germany’s largest cable company to enter talks, said people familiar with the bid.
Vodafone this week told Kabel Deutschland it would be willing to pay 85 euros a share, compared with the offer of 80 euros to 82 euros the German company initially rejected, said the people, who asked not to be named because talks are private. The Newbury, England-based company is now in discussions with Kabel Deutschland and studying its books before it presents an official offer in the coming weeks, they said.
The new proposal may lay the groundwork for a bidding war with John Malone’s Liberty Global Plc (LBTYA:US), which made its own preliminary offer that also was said to be valued at 85 euros a share. Kabel Deutschland rose past that price in Frankfurt trading, indicating that investors expect a higher offer. Kabel Deutschland shareholders may be able to demand 90 euros a share, Robin Bienenstock, an analyst at Sanford C. Bernstein in London, said in a note to investors.
“Vodafone has allowed itself to become hemmed in by Liberty Global and other competitors,” Bienenstock said. “There are no good outcomes for Vodafone shareholders -- either the company overbids or risks being shut out of their largest market.”
Kabel Deutschland advanced 0.5 percent to 85.96 euros at 1:14 p.m. in Frankfurt, valuing the company at 7.6 billion euros. The shares rose 34 percent since Vodafone’s interest first surfaced four months ago through yesterday. Vodafone fell 1.1 percent to 182.40 pence in London.
Liberty’s offer was in shares and the company could inject its existing German cable assets, Unitymedia KabelBW GmbH, into Kabel Deutschland, which would remain a listed entity, one of the people said.
Kabel Deutschland’s management, led by Chief Executive Officer Adrian von Hammerstein, may favor Vodafone’s bid because it is all cash and may have better chances of being approved by Germany’s Federal Cartel Office, the nation’s competition regulator, one person said.
Representatives at Vodafone, Munich-based Kabel Deutschland and Liberty declined to comment. Kabel Deutschland’s statement this week on Liberty’s preliminary offer didn’t disclose the price.
Kabel Deutschland sold shares for 22 euros apiece in its 2010 initial public offering.
Buying Kabel Deutschland would give Vodafone, the second-largest wireless carrier in the world, access to the German company’s 8.5 million connected households and potential customers for combined landline, mobile and TV subscriptions in Europe’s biggest telecommunications market.
Vodafone and Liberty Global both want Kabel Deutschland to expand their empires in Europe. Phone companies across the continent are bulking up their networks and adding services as they work to increase customer bills and loyalty. Bundles of TV, Internet and phone service are becoming increasingly popular, stoking deals and partnerships between carriers.
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