Liberty Global has opened its controversial €35 a share cash offer for all the stock in Belgium’s Telenet that its doesn’t already own – it is 50.4 per cent controlling shareholder. Minority shareholders will have until January 11th 2013 to accept.

Liberty Global says the offer is a 12.5 per cent premium to the September 19th 2012 Telenet closing share price, a 25.2 per cent premium over the volume weighted average share price during the 12 month period then ended and a 4.9 per cent premium over Telenet’s all-time high trading price prior to the announcement of the Offer; and 15.2 per cent premium to Telenet’s peer group Ziggo and Kabel Deutschland and Virgin Media.

However, so far Telenet management and its advisors are sticking to their valuation of €37 – €42 a share. It cites premium paid by acquirers in similar deals and its more optimistic forecasts, particularly in the mobile business.

Liberty is scathing about these forecasts saying: “Mobile growth is driven off aggressive assumptions that, according to the Independent Expert, would require Telenet to increase its market share in value from 1 per cent (2012 estimated) to 16 per cent (2018 estimated) and to capture the vast majority of mobile gross adds in Telenet’s footprint in 2018. The management plan is heavily reliant on growth in outer years and assumes minimal competitive response, even though competitors have already reacted and should be expected to continue to do so in the future; and the uncertainty of upcoming wholesale access regulation is not adequately reflected.”

Liberty has said it no longer requires 95 per cent acceptances and may just take as big a stake as it can implying any remaining shareholders will simply have to accept it should the parent company seek to increase the debt attributable to Telenet. Clearly they are also unlikely to keep the existing management after such a disagreement over future prospects. The management is advised by Lazards.

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