Vodafone Confirms Interest in Taking Over German Cable TV Giant KDG

Kabel Deutschland HQ H

Kabel Deutschland shares shot up 9.5 percent after the mobile phone group admitted it was considering a buyout bid.

COLOGNE, Germany – Shares in Kabel Deutschland (KDG) shot up Wednesday after wireless group Vodafone confirmed widespread rumors that it was considering a takeover bid for the German cable TV giant.

Kabel Deutschland stock was up as much as 9.5 percent early Wednesday after Vodafone said in a statement it has made a “preliminary” approach for KDG, Germany's largest cable operator.

Takeover talk has inflated KDG's market value. The company, which serves 8.5 million cable TV customers across Germany, is now valued at more than $9 billion, compared to less than $7.5 billion before the buyout chatter began.

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A successful bid by Vodafone would add KDG's cable subscribers to the mobile giant's millions of cell phone customers and help Vodafone expand into the fast-growing broadband Internet market.

Many also see the move as an attempt to outmaneuver cable mogul John Malone, whose Liberty Global controls Germany's number two cable group and who has been muted as a possible suitor for KDG. Malone has made it clear – most recently with Liberty $24 billion deal to buy U.K. mobile group Virgin Media, that he intends to merge his cable empire with national mobile assets across Europe. The strategy would see mobile services added to cable company's so-called triple-play offerings – in which broadband Internet, cable TV and fixed-line telephony services are bundled together.

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“If Vodafone doesn’t act now then Liberty will be there,” Andrew Hogley, an analyst at Espirito Santo Investment Bank in London told Bloomberg News.  “It’s become clear that triple-play operators can win market share in mobile very quickly.”

KDG on Monday confirmed Vodafone has made an approach but declined to comment further. Formal talks are not believed to have yet begun. Bloomberg quotes unnamed sources “familiar with the matter” as saying KDG wanted Vodafone to up its asking price before beginning official takeover negotiations. Vodafone said Wednesday there was no certainty it would make a formal offer for the cable group.