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Kabel Deutschland welcomes €7.7B cash offer from Vodafone


Ken Wieland

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Vodafone has made a €7.7 billion cash offer for Kabel Deutschland, Germany’s largest cable operator, which the firm’s management has welcomed. The offer includes €3 billion of net debt, taking the proposed enterprise value for the deal to €10.7 billion.

To bolster its “quad-play” armoury in the fight to attract and keep customers in Germany – Vodafone’s most profitable market outside the US – the mobile operator had earlier made an informal €7.2 billion bid for the cable firm, which Kabel Deutschland rejected.

Liberty Global, the US-owned cable giant owned by John Malone – a prolific dealmaker – then offered €7.5 billion. Again, Kabel Deutschland turned it down.

The management and supervisory boards of Kabel Deutschland, however, have welcomed Vodafone’s formal offer and – subject to review – intend to recommend it to shareholders.

The transaction will be implemented as a voluntary public tender offer by Vodafone’s wholly-owned subsidiary, Vodafone Vierte Verwaltungsgesellschaft mbH, for €84.50 per share in cash plus a €2.50 per share dividend, announced by Kabel Deutschland on 20 February.

Vodafone’s intention is that Kabel Deutschland’s management will be responsible for the consumer fixed-line business of the two companies (which includes the integration of Vodafone’s DSL business, Arcor) throughout Germany.

In a statement, Vodafone says it sees significant potential to accelerate the growth in Vodafone’s and Kabel Deutschland’s broadband, telephony and TV businesses “by leveraging Vodafone’s leading brand and extensive distribution and by cross-selling to each company’s customer base”.

“German consumer and business demand for fast broadband and data services continues to grow substantially as customers increasingly access TV, fixed and mobile broadband services from multiple devices in the home and workplace and on the move,” Vodafone’s chief executive Vittorio Colao said in a statement.

“The combination of Vodafone Germany and Kabel Deutschland will greatly enhance our offerings in response to those needs.”

Earlier this year Vodafone signed a deal that would give it access to Deutsche Telekom’s fixed line network, but it was suggested that this would not give it the same level of control of its options as a Kabel Deutschland takoever.

The combination of Vodafone and Kabel Deutschland will result in a group with €11.5 billion of pro forma revenue in Germany. The subscriber base would comprise 32.4 million mobile customers, 5 million broadband subscribers, and 7.6 million TV customers.

By the fourth full-year after the transaction is completed, Vodafone says it expects in-market cost and capex synergies to exceed an annual run-rate by €300 million before integration costs.

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