VODAFONE yesterday confirmed that it had won backing from Kabel Deutschland’s board for a €7.7bn (£6.6bn) takeover of the German cable company, paving the way for a deal that chief executive Vittorio Colao said would create “a leading player” in the company’s biggest market.
The acquisition – Vodafone’s biggest for six years – will allow the FTSE 100 group to become a major power in Germany’s broadband and pay-TV markets as revenues in its mobile business suffer.
Receiving the Kabel Deutschland board’s backing means Vodafone is likely to pip Liberty Global – the European cable group controlled by US billionaire John Malone – to the deal. The €87 per share offer improves on the €85 Liberty Global tabled last week, and Vodafone is seen as a more credible bidder, since it is able to offer cash rather than stock and is unlikely to face the same regulatory hurdles as Liberty.
Colao called the acquisition “a really good deal”, saying it fit into Vodafone’s strategy of selling so-called integrated services – adding TV, landline and internet products to its core mobile business – and that there were “substantial revenue synergies” associated with the purchase. The Italian is looking for a new growth story as US partner Verizon puts him under pressure to sell Vodafone’s stake in Verizon Wireless, the mobile network.
However, one top 10 shareholder said that while they understood the need to diversify into new services, they felt Vodafone had overpaid for Kabel Deutschland. “They are paying a big price because they have no choice, there are not many [acquisition opportunities] going around but I think [Vodafone] have looked at how much they can afford and found the biggest thing they can buy,” the person, who asked not to be named, told City A.M..
The acquisition will still have to be approved by regulatory authorities and Kabel Deutschland shareholders, although there are not expected to be any stumbling blocks.
ADVISERS VODAFONE’S GERMAN MEGA DEAL
VODAFONE’S longtime advisers UBS worked on the company’s acquisition of Kabel Deutschland, with some of the bank’s top telecoms and M&A experts handling the financials. Group managing director Simon Warshaw, who relinquished an executive position at UBS in November last year, headed up the team. He was joined by Christian Lesueur – the head of technology, media and telecoms investment banking for Europe, the Middle East and Africa – and Jonathan Rowley, who is in charge of M&A activity in the region.
Warshaw is a UBS veteran, having joined SG Warburg in 1986 before the Swiss bank acquired it in 1995. His past work for Vodafone includes advising on last year’s £1bn purchase of Cable & Wireless Worldwide and 2007’s $18.8bn (£12bn) acquisition of a controlling stake in Indian operator Hutchison Essar. Elsewhere, Warshaw advised BSkyB in the run up to News Corp’s abandoned bid for the broadcaster.
Lesueur meanwhile has worked on Vodafone deals worth more than $180bn between them, including 2006’s sale of its Japanese arm. Goldman Sachs also acted for Vodafone while Perella Weinberg and Morgan Stanley advised Kabel Deutschland.