Vodafone eyes €20bn landmark purchase of Malone firms

Paul Sandle

Vodafone is nearing a transformational deal to buy continental European assets from cable giant John Malone’s Liberty Global and could announce an agreement next week, according to sources familiar with the matter. In Ireland, Liberty Global owns Virgin Media and broadcaster TV3.

Talks between the two companies about a deal for Liberty’s German and Eastern European cable operations are nearing a conclusion, according to the sources. “It’s the final phase,” one of them said.

Mr Malone’s Liberty will report its first-quarter results next Wednesday after the US market closes and Vodafone has its annual results the following week, on May 15. Either earnings announcement would provide the companies with an opportunity to unveil a deal. The two sides could still hit a hurdle, however, the sources cautioned.

Vodafone said in February it was in talks about buying Liberty’s assets in the continental European countries where they overlap: Germany, Czech Republic, Hungary, and Romania. The two had previously discussed combining operations in 2015, but they could not reach agreement on values.

But the logic of bundling Vodafone’s mobile networks with Liberty’s broadband and cable TV to take on former incumbents such as Deutsche Telekom never went away. The thesis has already been tested in the Netherlands, where the two formed a joint venture, VodafoneZiggo, in 2016.

When the talks were announced three months ago, analysts at Royal Bank of Canada said that based on a typical deal multiple of 11 times enterprise value divided by core earnings, Vodafone could pay about €20.7bn for Liberty’s Unity Media in Germany and the other assets.

Deutsche Telekom has already voiced its concern and a lobby group representing Germany’s glass fibre industry chimed in by saying it should be blocked.

Separately, Virgin Media said it would close four of its eight customer sites resulting in about 500 job losses in the UK. It said it planned to spend £40m (€45.4m) on increasing capacity at its existing centres and buying alternative sites.

The Vodafone talks coincide with a mergers and acquisitions boom in Britain as company bosses take advantage of the availability of cheap debt financing and confidence in the global economy to strike deals.

Earlier this week, supermarket giant Sainsbury struck a €8.3bn deal to buy rival Asda, while Japan’s Takeda agreed preliminary terms of a €53.4bn offer for drugmaker Shire. Vodafone shares fell 1.7%, valuing it at €64.3bn. Reuters.

- Additional reporting Irish Examiner

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