Reports: Vodafone, Liberty Global vie over Kabel Deutschland

Vodafone has raised its preliminary offer for Kabel Deutschland in an effort to fend off a competing bid from Liberty Global, as the two companies look set to enter a bidding war for the German cable operator, according to multiple reports.

According to Bloomberg, Vodafone said it is willing to pay €85 per share for Kabel Deutschland, valuing it at about €7.5 billion ($10 billion). This follows reports from Bloomberg, Reuters and the Financial Times that Liberty Global had also offered around €85 per share for the German cable company. All the reports cited unnamed sources. The companies declined to comment.

Vodafone's first offer was believed to be around €80 to €82 per share and was rejected by Kabel Deutschland.

Vodafone's latest offer could spark a bidding war with Liberty Global which is owned by John Malone. This could push Vodafone to offer as much as €90 a share, Robin Bienenstock, an analyst at Sanford C. Bernstein, told Bloomberg.

Vodafone wants to buy the German cable operator to support its strategy of offering quad-play bundles of fixed and mobile services in Europe, with Germany seen as a key market for multi-service bundles.

For Liberty Global, the move would be more related to consolidation efforts. "In markets like the U.S. and Europe they've reached a limit on penetration--there are no more new houses to connect with cable,"  Recon Analytics analyst Roger Entner told Bloomberg. "If you want to grow, the next step is consolidation."

Industry observers note that Liberty Global could merge its existing German cable assets, Unitymedia KabelBW GmbH, into Kabel Deutschland, Bloomberg reported. The Financial Times added that by structuring a deal in this way, Liberty believes it could get around regulatory concerns because it would not have majority ownership at the holding company level.

Reuters reported Kabel Deutschland might still be more inclined to accept Vodafone's bid because of these potential regulatory issues, however. The competition regulator has already blocked Kabel Deutschland's previous bid to take over smaller Berlin-based cable group Telecolumbus for €618 million. Reuters added that Vodafone believes its all-cash offer and absence of antitrust issues put it in a better position than its rival.

There are also concerns about Liberty Global's potential ability to finance such a deal due to the company's recent acquisitions. The company bought Virgin Media in the UK for about $15.75 billion (€11.86 billion) in February and a 13 per cent stake in Ziggo in the Netherlands for €633 million ($844.9 million) in March.

An unnamed source close to the situation told Reuters that Kabel Deutschland had requested binding bids in two weeks.

For more:
- see this Bloomberg article
- see this Reuters article
- see this separate Reuters article
- see this FT article (sub. req.)

Related Articles:
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Liberty Global eyes Kabel Deutschland acquisition
Vodafone confirms early talks with Kabel Deutschland
Report: Vodafone still eyeing Kabel Deutschland purchase

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