Liberty Global to Sell German, Eastern European Units to Vodafone in $22.7B Deal

Getty Images
Liberty Global chairman John Malone

John Malone's international cable operator will leave its operations in Germany, Hungary, the Czech Republic and Romania to the U.K. telecom giant.

John Malone's international cable operator Liberty Global and U.K. telecom giant Vodafone Group have finally struck a deal.

The two companies had in the past discussed a possible exchange of assets amid continued consolidation talks in the cable and telecommunications sectors, but without success. Vodafone earlier this year had said that that "it is in early-stage discussions with Liberty Global regarding the potential acquisition of certain overlapping continental European asset," but not about a merger. 

On Wednesday, the two said they have agreed to a deal with an enterprise value of €19.0 billion, or $22.7 billion, that will see Liberty Global sell its businesses in Germany, Hungary, the Czech Republic and Romania to Vodafone, which is the world’s second-largest wireless company in terms of subscribers.

The businesses represented approximately 28 percent of Liberty Global’s 2017 operating cash flow. The companies expect regulatory approval from the European Commission in mid-2019.

The company has long said it was open to acquiring and selling assets to optimize shareholder value and focus on markets where it has a significant presence and strength.

"We have a rich history at Liberty Global of successfully developing and reshaping our business to drive innovation, advance customer services and create significant value for shareholders," said Liberty Global CEO Mike Fries. "This is one of those moments."

"After completion of the transaction, Liberty Global will continue to be Europe’s leading cable television and broadband provider, with consolidated operations in the United Kingdom, Ireland, Belgium, Switzerland, Poland and Slovakia," Liberty Global highlighted.

Those country operations reach 24 million homes with 26 million video, broadband and fixed-line telephony subscribers and 6 million mobile services. In addition, Liberty Global owns a 50 percent stake in VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million phone and 5 million mobile services. Liberty Global, which has been growing its Latin American business, will get $12.5 billion (€10.6 billion) of cash proceeds from the deal.

Over the years, analysts and bankers have often highlighted potential deal opportunities between the companies. Both have operations in Western Europe, including in the U.K. and Germany, which analysts have long said could potentially be combined or swapped. Vodafone in 2013 beat out Liberty Global to acquire Kabel Deutschland, Germany's largest cable operator, for $10.1 billion. Back then, there was talk that it could sell at least parts to Liberty Global over time.

Liberty Global has focused on broadband as its core service and offering video, telephony and more in addition to it. Vodafone has been eyeing cable systems as the cable and telecom industries continue to concentrate on the quadruple play of pay TV, broadband, telephony and wireless services.

The transaction will boost Vodafone's cable systems reach in a potential challenge to Germany’s biggest operator, Deutsche Telekom.