Vodafone raises Kabel Deutschland offer after rival bid

Vodafone Group Plc raised its preliminary offer to buy Kabel Deutschland Holding AG to about €7.5 billion to persuade Germany's largest cable company to enter talks, said people familiar with the bid.

Vodafone this week told Kabel Deutschland it would be willing to pay €85 a share, compared with the offer of €80 to €82 the German company initially rejected, said the people, who asked not to be named because talks are private.

The Newbury, England-based company is now in discussions with Kabel Deutschland and studying its books before it presents an official offer in the coming weeks, they said.

The new proposal may lay the groundwork for a bidding war with John Malone's Liberty Global Plc, which made its own preliminary offer that also was said to be valued at €85 a share.

Kabel Deutschland rose past that price yesterday in Frankfurt trading, indicating that investors expect a higher offer.

“In markets like the US and Europe they’ve reached a limit on penetration -- there are no more new houses to connect with cable,” said Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts. “If you want to grow, the next step is consolidation.”

Buying Kabel Deutschland would give Vodafone, the second- largest wireless carrier in the world, access to the German company’s 8.5 million connected households.

Kabel Deutschland advanced 3.7 per cent to €85.51 in Frankfurt yesterday, valuing the company at €7.6 billion. The shares have risen 34 per cent since Vodafone’s interest first surfaced four months ago.

Bid Preference Representatives at Vodafone, Munich-based Kabel Deutschland and Liberty declined to comment.

Kabel Deutschland‘s statement this week on Liberty’s preliminary offer didn’t disclose the price.

Kabel Deutschland‘s management, led by chief executive officer Adrian von Hammerstein, may favor Vodafone‘s bid because it is all cash and may have better chances of being approved by Germany’s Federal Cartel Office, the nation’s competition regulator, one of the people said.

Liberty's offer of €85 was in shares and the company could inject its existing German cable assets, Unitymedia KabelBW GmbH, into Kabel Deutschland, which would remain a listed entity, one person said.

Bloomberg