Vodafone raises Kabel Deutschland bid to $10 bn

Vodafone Group Plc has raised its initial offer to buy German cable operator Kabel Deutschland Holding AG (KD) to about €7.5 billion ($10 billion) in order to be included in takeover talks, Bloomberg yesterday reported, citing people familiar with the bid.

The move comes a day after KD, Germany's biggest cable operator said that it had received a preliminary takeover bid from its US rival Liberty Global, setting up a potential bidding war with Vodafone Group. (See: Liberty Global tables preliminary bid for German cable operator Kabel Deutschland)

Vodafone told KD this week that it would be willing to pay €85 a share, compared with the €80 to €82 a share the German company had earlier rejected, said the report.

Vodafone is now in discussions with KD and studying its books before it tables an official offer in the coming weeks, the report added.

Vodafone, the world's second-largest mobile phone company, had last week confirmed media reports that it is in takeover talks with KD.

"Vodafone Group Plc notes the recent speculation regarding a potential offer for Kabel Deutschland Holding AG and confirms that it has made a preliminary approach to KD regarding a possible offer for the company," Vodafone had said in a statement.

"There is no certainty that any offer will ultimately be made nor as to the terms on which any such offer might be made," Vodafone added.

Shares of KD rose 27 per cent after Vodafone's interest first surfaced four months ago and yesterday passed the €85 a share mark, indicating that investors expect a higher offer from Liberty or from Vodafone.

Vodafone had in February also said that it was in discussions with KD, but the talks failed after the German cable operator's CEO, Adrian von Hammerstein rejected Vodafone's informal offer as too low.

By acquiring the biggest cable provider in Germany, Vodafone would add with 8.5 million connections and add fixed-line services to its mobile offerings, preempting Liberty Global Inc from acquiring them.

KD offers digital, high definition (HD) and analog TV, Pay TV and DVR offerings, Video on Demand, broadband and fixed-line phone services via cable as well as mobile services.

The publicly-listed company operates cable networks in 13 German federal states and supplies its services to approximately 8.5 million households.

The company has approximately 3,500 employees, market capitalisation of €7 billion, and annual turnover of €1.7 billion.

Vodafone emerged as a market leader in mobile in Germany following its huge, £112 billion merger with Mannessmann in 2000, a deal that turned out to be hugely over-inflated.

Liberty Global, which operates in Germany under the Unitymedia Kabel BW brand, is the second-largest cable operator in the country. An offer from Unitymedia would come under intense scrutiny from competition authorities.

For Liberty Global, the potential KD deal comes a few months after it acquired UK's Virgin Media in a $15.8 billion cash and stock deal.

Liberty Global had in March acquired a 12.65 per cent stake in Dutch cable TV operator Ziggo NV from Barclays Capital Securities Limited, for a total investment of approximately €632.5 million.

Eighty per cent of its revenue comes from Europe, of which, two-thirds comes from four countries, Belgium, the Netherlands, Switzerland and Germany.

Last year, it fully acquired Belgian peer Telenet Group Holding NV for $2.56 billion. In terms of revenues, Telenet is Liberty's second largest business after its European division UPC.

With 23.3 million customers, Europe is Liberty's biggest market and is the largest international cable company with 25 million customers in 14 countries.