Vodafone launches EUR7.7bn KDG offer

24 May 2013

Vodafone Group has announced its intention to acquire Germany’s largest cable operator, Kabel Deutschland (KDG), for EUR7.7 billion (USD10.1 billion), in a move that would bolster its position in the fixed line market. The British firm will offer KDG shareholders a total value of EUR87 in cash per share, comprising EUR84.50 pursuant to the voluntary public tender offer, plus payment of the EUR2.50 dividend announced by KDG earlier this year. The offer also includes EUR3 billion of net debt, taking the proposed enterprise value of the deal to EUR10.7 billion. The combination of its German unit with KDG, which has a network serving around 8.5 million households in 13 out of 16 states, would ‘create a leading integrated communications operator, with EUR11.5 billion of pro forma revenues in Germany, offering consumer and enterprise customers premium unified communications services’, Vodafone said. Following completion of the transaction, Vodafone would have 32.4 million mobile, 5.0 million fixed broadband and 7.6 million direct TV customers in Germany. The firm intends to migrate its existing fixed line DSL customer base to KDG’s cable network where possible, generating savings from closing down DSL central offices, reduced maintenance costs and removing the need to pay unbundled local loop (ULL) and bitstream fees. Outside of KDG’s footprint, Vodafone will continue to offer fixed broadband access to consumer and business customers via DSL or via its recently announced VDSL bitstream agreement with incumbent Deutsche Telekom.

Commenting on the transaction, which is subject to regulatory clearances by the appropriate authorities, Vodafone Group chief executive Vittorio Colao said: ‘The combination of Vodafone Germany and KDG will greatly enhance our offerings in response to those needs and is consistent with Vodafone’s broader strategy of providing unified communications services. The transaction announced today – which the Management and Supervisory Boards of KDG intend to recommend to their shareholders – will lead to the creation of an operator with significant competitive scale, attractive operating and capital investment efficiencies and a combined management team with expertise across all communications segments and technologies. We look forward to welcoming the people of KDG to Vodafone and to working together to build an advanced unified communications provider to serve customers across Germany.’ Meanwhile, KDG’s CEO Dr. Adrian von Hammerstein said: ‘KDG has evolved into one of the most dynamic players in the sector. Its high-performance infrastructure and successful strategy makes it ideally placed to continue returning above-average growth in a rapidly changing market. KDG and Vodafone are an ideal fit. Together, we have the opportunity to become Germany’s leading telecommunications and television provider and to create what for the German market is a unique, winning combination of fixed line and mobile communications.’

Earlier this month CommsUpdate reported that KDG had rejected an initial bid of around EUR80-EUR82 per share from Vodafone, while at the same time the German cableco confirmed it had received a preliminary approach from Liberty Global, the US media group controlled by John Malone. Liberty Global already owns the country’s second largest cableco, Unitymedia KabelBW, which was formed last year from the consolidation of Unitymedia and Kabel BW; the US firm had originally purchased the two companies in early 2010 and late 2011, respectively.

Germany, Kabel Deutschland, Liberty Global (incl. LGI), Vodafone Germany, Vodafone Group