May 20, 2015 / 9:04 AM / in 2 years

Vodafone shares rise on Malone's Liberty tie-up comments

LONDON (Reuters) - Vodafone’s (VOD.L) shares jumped 4 percent on Wednesday after the chairman of Liberty Global (LBTYA.O), John Malone, said the two companies would make a “great fit”, reigniting long-running merger speculation.

A man speaks on his mobile phone as he walks past logos of Vodafone painted on a roadside wall in Kolkata May 20, 2014. REUTERS/Rupak De Chowdhuri

Vodafone, the world’s second-biggest mobile operator, has long been linked with a purchase or tie-up with Liberty, Europe’s largest cable operator, as the market increasingly moves towards the combination of mobile services with fixed-line broadband.

In order to bolster its offering, Vodafone has bought individual cable operators in certain European markets but a purchase of Liberty would broaden its fixed-line business in one go.

“We’ve looked at that from our side and there would be very substantial synergies if we could find a way to work together or combine the companies with respect to western Europe,” Malone told Bloomberg in an interview.

“There’s the promise of creating enormous shareholder value if we could work it out,” he said, declining to comment on whether the companies were in talks.

Analysts at Jefferies said the comments from Malone indicated a change of tone which could be seen as an attempt to test the reaction of shareholders.

Liberty Global, which is present in 14 countries including Germany, Britain and the Netherlands, has a market capitalization of $45 billion, while Vodafone has a market cap of 63 billion pounds ($98 billion).

“From a Vodafone perspective, we have argued that a merger with Liberty Global would make sense,” Jefferies analysts said. “If more lukewarm prior statements by Liberty Global had cast undue doubt over the merger scenario, we think these latest statements should remove it.”

Five people close to the matter had told Reuters in November that Vodafone was reviewing potential acquisitions, including Liberty Global, as part of its normal strategic assessments.

That bout of speculation had caused Vodafone’s shares to slide at the time as shareholders balked at the prospect of the British company spending billions of pounds on a takeover.

On Tuesday, before Malone’s comments were published, Vodafone Chief Executive Vittorio Colao declined to comment on the prospect of a deal with Liberty.

“We have our own strategy, it is an organic strategy,” he told reporters on a full-year results call.

“We continue to grow, we are an important player in broadband in Europe. I will look at assets but I will not comment on specific situations.”

No one at Vodafone could immediately be reached for comment on Wednesday, while Liberty Global declined to add to Malone’s comments.

Reporting by Ismail Shakil in Bengaluru and Kate Holton in London. Editing by Louise Heavens and Jane Merriman

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