Activist hedge fund Elliott Management said that Vodafone Group may have to dish out an additional €8 billion for Kabel Deutschland, which the operator acquired for €7.7 billion last year, depending on the outcome of a court case.
Elliot has filed a complaint in German courts against Vodafone, saying the company undervalued its stake in Kabel Deutschland Holding AG.
In a quarterly letter to investors, cited by Financial Times (FT), Elliott, which owns 13 per cent of Kabel Deutschland shares, claimed Vodafone should have paid €250 per share instead of €84.53.
If it is successful in suing Vodafone, the latter will have to make up the difference in the price and the dividend payments, which would come to over €8 billion – a sum that the operator has not shown a provision for fully.
According to the German legal system, Vodafone must pay Elliott a dividend of 5 per cent above the German base interest rate until the matter is settled in court, while Elliot has the right to sell its stake at €84.53.
However, Vodafone has been dismissive of the accusations, saying “Nobody should take this seriously.”
“These assertions are wholly without foundation and bear no relation to the facts. Vodafone’s offer of €84.53 per Kabel Deutschland share has been approved as appropriate compensation by an independent court-appointed auditor, and a valuation conducted by two independent auditors attributed a value of €75.76 per Kabel Deutschland share,” it told FT.
A year ago it was reported that Elliott tendered part of its stake in order for the bid to succeed, but was planning legal action along with two other hedge funds, Davidson Kempner and York Capital, in hope of forcing a higher price from Vodafone for their remaining stakes.