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Vodafone bids to own KDG outright

December 22, 2020

Vodafone has made a €2.1 billion offer to buy out minority shareholders of Kabel Deutschland Group (KDG) as it wants to reduce exposure to long-running legal claims that the telecoms group underpaid to acquire the German company in 2013.

“Following completion of the offer, Vodafone will own at least 93.8 per cent of the outstanding share capital of KDG,” Vodafone said, in its disclosure. “The cash consideration will be funded from Vodafone’s existing cash resources.”

The plan is to offer €103 in cash for each Kabel Deutschland share, slightly lower than the 30-day average price of €108 but higher than the €92 a share it would have to pay under options that were created at the time of the takeover.  If all minority shareholders (about 23 per cent) accept the offer that stands until February 1st, it will cost Vodafone €2.1 billion.

KDG is Germany’s largest cable company, operating in 13 of the counties’ 16 states. Vodafone undertook to pay to the minority shareholders of KDG an annually recurring net compensation of €3.17 per KDG share in cash. Vodafone also agreed, upon demand, to purchase such minority shareholders’ KDG shares for €84.53 per share in cash. In accordance with German law, the price increases every year, based on a formula of German base rate plus 5 per cent less dividends paid.

At the instigation of the KDG minority shareholders, in late 2019, the Munich District Court considered if the mandatory cash offer made to minority shareholders in Vodafone’s takeover of KDG was enough. The court concluded it was adequate, given KDG’s s earnings potential was based on an outlook set out by the Board of KDG in November 2013, but a number of KDG minority shareholders appealed this decision, triggering an appeals process which has begun and is expected to take several years.

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