Vodafone agrees to Kabel Deutschland deal for US$10 bil.
By Kate Holton and Harro Ten Wolde, Reuters
June 25, 2013, 2:41 pm TWN
LONDON/FRANKFURT -- Vodafone has agreed to buy Germany's largest cable operator, Kabel Deutschland, for 7.7 billion euros (US$10 billion), betting on TV and fixed-line services in its biggest deal since 2007.
Announcing its second major acquisition for a European fixed-line network in 12 months, Vodafone said it would pay 87 euros (US$110) per share for the group to enable it to offer more competitive packages with TV, fixed-line and broadband services to its mobile customers.
The world's second-largest mobile operator, following up its acquisition of Cable & Wireless Worldwide, is however paying a rich price for the German firm and its 8.5 million homes, which it considered buying before it went public in March 2010 at 22 euros per share.
One trader who asked not to be named said the offer, Vodafone's biggest since a 2007 Indian acquisition, valued Kabel Deutschland at 12 times enterprise value against 2013 core earnings, a 35-percent premium to the sector.
However, this falls to 8.5 times when taking into consideration the synergies Vodafone expects to extract. “We believe this is a decent deal for Vodafone,” the trader said.
Shares in the group had been trading at 63 euros before Vodafone's initial interest was reported in February.
The UK-based company was forced to raise its offer in the last week after John Malone's Liberty Global entered the fray, forcing it to up the stakes or face losing ground to Liberty's own cable operator Unity Media and to Deutsche Telekom.
“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,” Vodafone Chief Executive Vittorio Colao said.
“The combination of Vodafone Germany and Kabel Deutschland will greatly enhance our offerings in response to those needs.”
The board of Kabel Deutschland said it expected to recommend the offer to its shareholders, although some analysts thought Liberty Global could still return with a counter offer even though it would likely face high regulatory barriers.