British Vodafone has reached an agreement on a friendly takeover of Kabel Deutschland, the leader in the German cable television market. The transaction amount will be 7.7 billion euros for 100% of Kabel Deutschland shares, or 87 euros per share.

British telecommunications company Vodafone, the world's second-largest mobile operator by revenue, will acquire 100% of the shares of German corporation Kabel Deutschland, the largest cable television operator in Germany. According to a Vodafone press release, the deal is valued at 7.7 billion euros excluding debt, i.e. 87 euros per ordinary share of Kabel Deutschland. Of this amount, 84.5 euros will be paid to shareholders in cash, and another 2.5 euros as dividends declared by Kabel Deutschland in February. Based on adjusted net debt of €3 billion as of March 31, Kabel Deutschland would cost Vodafone €10.7 billion.

The deal has already received approval from the board of directors of Kabel Deutschland, and to close it, it remains to obtain the consent of the shareholders of the German company.

The merger of Vodafone and Kabel Deutschland will create one of the world's largest integrated communications operators (that is, providing cable television, telephony and broadband Internet access services). The new company's revenues in Germany are expected to be €11.5 billion per year. As a result of the transaction, Vodafone's customer base will increase by 32.4 million mobile customers, 5 million Internet users and 7.6 million cable TV users.

Following news of the deal, Vodafone's share price rose 1.75% at the opening of trading in London. The UK company's market capitalization currently stands at €101.5bn (£86.4bn).

The announcement of a deal between Vodafone and Kabel Deutschland could be followed by competition from the US telecommunications company Liberty Global, which a few days earlier also made an unofficial takeover bid for Kabel Deutschland. Liberty Global valued the German cable operator at about 7.5 billion euros, or 85 euros per share. However, Liberty Global's efforts run the risk of antitrust enforcement because the U.S. company already owns Germany's second-largest cable operator, Unitymedia, and regulators have thwarted attempts by the two market leaders to merge in the past.

This is not the first time Vodafone has entered into a major deal in the German telecommunications market. In 2000, the British company absorbed the German mobile operator Mannesmann, paying more than $180 billion. At that time, it was the largest deal on the M&A market. The purchase of Kabel Deutschland is not a new record, but it is Vodafone's biggest deal since it entered India in 2007 and will strengthen the British company's position in Europe, where it competes with Deutsche Telekom and Britain's O2. In addition, the purchase of Kabel Deutschland can be regarded as a strategic move of a defensive nature. Vodafone plans to sell a 45 percent stake in the largest US mobile operator to Verizon Wireless, raising between $120 billion and $135 billion and making it an easier takeover target. Thanks to Kabel Deutschland, Vodafone's position will be strengthened amid rumors that another American telecommunications giant, AT&T, is looking to take over the European mobile operator.

Natalia Barkhatova

Vodafone will buy Kabel Deutschland for 7.7 billion euros