Here’s Why Liberty Global Stepped Aside for Vodafone
Liberty Global PLC (NASDAQ:LBTYA) is reportedly dropping out of the race for German telecommunications giant Kabel Deutschland Holding AG as Britain’s Vodafone Group (NASDAQ:VOD) has made a higher offer, and Liberty expects it would face significant antitrust issues even if Kabel Deutschland accepted its offer.
Liberty Global, which is owned by billionaire John Malone, made an 85 euro per share offer for Kabel Deutschland last month. Vodafone trumped that bid last week with an offer of 87 euros per share. Liberty has not been in touch with Kabel Deutschland since Vodafone made its offer, but sources told Bloomberg it’s unlikely Liberty will pursue trying to buy the German company.
Liberty faces two major obstacles in its desire to buy Kabel Deutschland. First, the company already owns Germany’s No. 2 cable company, a combination of Unitymedia and Kabel Baden-Wuerttemberg GmbH, which would make receiving antitrust approval on the deal difficult. Secondly, Vodafone’s offer is expensive and cash-based, which would be hard for Liberty to trump. Liberty’s previous offer included inserting some of Liberty’s existing cable holdings into Kabel Deutschland and other non-cash concessions.
Kabel Deutschland’s board is reportedly in favor of the Vodafone deal. Kabel Deutschland CEO Tony Ball has admitted that Vodafone has been interested in his company since 2010, and said he had received a call from Vodafone CEO Vittorio Colao recommending Vodafone’s takeover bid. Vodafone’s offer comes to a total of 7.7 billion euros.
Ball said to the Financial Times that the Vodafone deal was the company’s best option, saying of the Liberty offer: “There was a bid from Liberty but it didn’t progress. They didn’t develop it. There would have been significant regulatory oversight anyway.”
Ball believes the deal will provide many useful synergies for Vodafone, citing the fact that wireless companies are under more pressure than ever to expand outside of just offering phone calls to their customers. An acquisition of Kabel Deutschland would allow Vodafone to venture into the popular “quad-play” business, in which mobile, broadband, fixed line, and television are offered together in a bundled service.
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