Bloomberg News

Malone Yields to Vodafone in German Battle as He Looks South (1)

July 17, 2013

Liberty Global Chairman John Malone

“We’re getting to the point where in northern Europe, we’re pretty much as far as we can go,” said John Malone, chairman of Liberty Media Corp. “If southern Europe sort of hits the bottom, as it were, there are things we can do further south in scale.” Photographer: Daniel Acker/Bloomberg

John Malone, the billionaire who controls Liberty Global Plc (LBTYA:US), said he’s out of the race for Kabel Deutschland Holding AG (KD8) and will look to southern Europe for opportunities when the economy there starts improving.

Vodafone Group Plc (VOD) agreed to buy Germany’s largest cable operator last month after increasing its bid to 87 euros ($114) a share, or 7.7 billion euros, to top Liberty Global’s 85-euro offer. Liberty Global had considered countering Vodafone’s offer, people familiar with the matter have said.

“Unfortunately the Vodafone guys have preempted us in trying to consolidate the rest of Germany,” Malone, 72, said in a phone interview yesterday. “We wish Vodafone good luck. We’re hoping they’ll be a good fellow traveler in the cable business.”

Options for Liberty Global, which acquired U.K. pay-TV company Virgin Media Inc. for $16 billion this year, to further consolidate cable business in northern Europe are becoming limited, Malone said. Of the 14 countries it operates in, 12 are in Europe, with holdings in Germany, Austria, Belgium, Ireland, Switzerland, the U.K. and six other countries on the continent.

“We’re getting to the point where in northern Europe, we’re pretty much as far as we can go,” Malone said. “If southern Europe sort of hits the bottom, as it were, there are things we can do further south in scale.”

Antitrust Concerns

Ben Padovan, a Vodafone spokesman, declined to comment on Liberty’s interest in Kabel Deutschland or their interactions as consolidators in Europe.

Vodafone plans to complete its acquisition of Kabel Deutschland after the German cable operator’s shareholder meeting in October, three people familiar with the matter said this week. That would mean the 2.50-euro dividend promised to shareholders would be paid by Kabel Deutschland, effectively reducing Vodafone’s offer, which included the dividend, to 84.50 euros.

Aside from the uncertainty on whether Liberty Global would make a counterbid, closing the deal hinges on securing authorization from antitrust regulators. That approval was perceived as easier for Vodafone, which has no cable assets in Germany, since Liberty Global already controls the country’s second-biggest cable provider.

Southern Opportunities

“We don’t expect these discussions to be very complicated,” Vodafone Chief Executive Officer Vittorio Colao said last month. Macquarie Research analyst Alex Grant concurred in a note to investors, saying the acquisition would leave Vodafone with a “reasonable” 18 percent broadband market share after the transaction closes.

Cable companies in southern Europe include Spain’s Grupo Corporativo ONO SA, France’s Numericable SAS and Zon Multimedia SGPS SA in Portugal.

Zon shares jumped as much as 5.1 percent to 3.89 euros and traded 4.3 percent higher at 9:01 a.m. in Lisbon. It’s the biggest gainer by index points on Portugal’s PSI 20 Index.

Vodafone rose 0.1 percent to 193.65 pence in London. Kabel Deutschland slipped less than 0.1 percent to 84.35 euros in Frankfurt. Liberty Global dropped less than 1 percent to $79.76 in New York yesterday.

Liberty Global’s acquisition of Virgin Media was the biggest takeover in the telecommunications industry announced this year, which has seen deals totaling about $47 billion, according to data compiled by Bloomberg. Kabel Deutschland is the second-largest media deal this year, the data showed. Media transactions have totaled more than $53 billion this year.

To contact the reporters on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net; Adam Ewing in Stockholm at aewing5@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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