Auditor’s report finds discrepancy in Kabel Deutschland takeover price?

9 Dec 2014

A special auditor’s report has found that there was a discrepancy between the price Vodafone Group paid for German cableco Kabel Deutschland and the value of the company, according to Reuters. In October it was reported that US hedge fund Elliott Management Corporation, which holds a 13.5% stake in Kabel Deutschland, had filed a lawsuit against the cable operator over the price of its takeover by UK-based Vodafone last year. Elliott asked a court in Munich to order the company to give it a full copy of the auditor’s report which looked into the actions of Kabel Deutschland and Vodafone before and during their merger negotiations. ‘The discrepancy between the investment banks’ considerations of the company’s value and the takeover price paid by Vodafone is not plausible according to the findings of the report,’ Reuters quotes the auditor’s report as saying, while adding that the firm had not provided the documentation necessary to clear up the discrepancy.

Vodafone officially announced its intention to acquire Kabel Deutschland for EUR7.7 billion (USD10.6 billion) and EUR3 billion of net debt in June 2013. After launching a voluntary public takeover offer, on 13 September 2013 Vodafone said that the 75% minimum acceptance condition had been met, and following European Commission approval, the transaction completed on 14 October 2013 with Vodafone holding 77% of the cableco’s share capital. However, in July 2014 Elliott and investment management firms Davidson Kempner and York Capital sued Vodafone for a higher compensation. The funds had tendered some of their shares to enable Vodafone to complete the deal. Elliott has asked for between EUR225 and EUR275 per share of Kabel Deutschland, notably higher than the EUR84.53 in cash that Vodafone had offered. The auditor’s report allegedly states that valuations by investment banks based on the company’s long-term planning indicated a value for Kabel Deutschland of EUR104 per share (excluding additional synergy effects estimated at up to EUR19.50 a share).

Germany, Kabel Deutschland, Vodafone Group