Vodafone and Liberty face battle for Kabel Deutschland

Tue Jun 18, 2013 1:33pm EDT
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By Paul Sandle and Sophie Sassard

LONDON (Reuters) - Vodafone faces a battle for Germany's largest cable company, Kabel Deutschland, although rival bidder Liberty Global of the United States has bigger regulatory and funding hurdles to overcome.

Liberty Global, which owns Unity Media, Germany's second biggest cable operator, joined the race on Tuesday. It tabled an 85 euro a share offer, according to a person familiar with the matter, days after the British mobile company said it was in talks about a deal.

Vodafone wants to buy Kabel Deutschland so that it can offer TV, fixed line and broadband to more of its mobile customers, while Liberty Global wants more consolidation in one of its best-performing markets. Vodafone offered about 81-82 euros a share in cash, sources said last week.

Shares in Kabel Deutschland closed 3.7 percent higher at 85.51 euros, valuing the group's equity at 7.56 billion euros ($10.1 billion).

A Liberty Global deal would be closely scrutinized by German anti-trust authorities because the combined company would control roughly 60 percent of the country's television market.

"Shareholders of Kabel Deutschland would have to consider the possibility that a potential Liberty offer faces a lengthy regulatory review with an uncertain outcome," wrote analysts from Jefferies in a note.

Liberty Global's chief financial officer Charles Bracken recognized the hurdle on June 12 when he told a Goldman Sachs cable conference that while the industrial logic for consolidation in Germany was compelling, regulatory opposition remained a significant barrier to any deal in the near future, according to a note from the bank.

Germany's competition regulator in February blocked Kabel Deutschland's bid to take over smaller Berlin-based cable group Telecolumbus for 618 million euros. In 2011, when Liberty bought KBW, a regional player in the German federal state of Baden-Württemberg, the regulatory review took nearly nine months.   Continued...

The logo of Germany's biggest cable operator, Kabel Deutschland, is written on a door bell at the Kabel Deutschland playout center in Frankfurt February 25, 2013. REUTERS/Lisi Niesner