June 19, 2013 2:26 am

Liberty Global plans to put assets on the table in bid for Kabel

Liberty Global is confident of structuring a €7.5bn bid for Kabel Deutschland that can overcome regulatory opposition and compete with a similarly-priced offer for Germany’s largest cable group from Vodafone.

The media group controlled by US cable pioneer John Malone has proposed injecting its existing German cable assets and keeping KDG’s public listing, three people familiar with the move said.

One person familiar with the situation said Liberty had been in contact with German regulators about its putative bid. It was aware of the challenges but confident it could get around regulatory concerns about combining Germany’s two largest cable companies, even with a majority stake in the resulting holding company.

Liberty’s proposal includes a cash component, two of these people said. It was unclear on Wednesday when Liberty might make a firmer offer or what its final terms would be.

Liberty tabled an indicative offer valued at about €85 per share in recent days, valuing KDG’s equity at €7.5bn. The offer was presented after Vodafone last week confirmed it had approached the German group.

While Vodafone’s first indicative offer price was not officially disclosed, people familiar with the situation put the original terms at about €80 a share.

People familiar with the bidding said Vodafone representatives had indicated to KDG that it planned to make a revised bid. One of these people expected the new offer would match Liberty’s indication of about €85 a share and would be all cash.

Liberty already owns Germany’s second-largest cable operator, Unitymedia – prompting analysts to predict close regulatory scrutiny of any firm offer.

All parties declined to comment.

Deals in the German cable sector have faced long regulatory reviews. Earlier this year, the regulator blocked a bid by KDG for Tele Columbus. Liberty’s acquisition of Kabel Baden-Württemberg in 2011 took nine months to clear and required big concessions.

However, one of the people familiar with the situation said that unlike in the KDG/Tele Columbus deal, Liberty and KDG’s assets do not overlap geographically. A combined Liberty-KDG would also be smaller than Deutsche Telekom in Germany.

“Any regulatory review of a Liberty/[KDG] tie-up is likely to take approximately a year to complete, and the ultimate outcome of this process is very hard to predict now,” said analysts at Olivetree Financial in a note.

They added: “The uncertainty over the deliverability of any firm offer from Liberty will not come as new news to the target, but to compete with Vodafone’s “certainty” of closure, Liberty will need to compensate shareholders handsomely.”

Correction: This story has been updated to correct the characterisation of Liberty Global’s indicative offer

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