U.S. media giant, Liberty Global Inc. (LBTYA) has made an offer to acquire Germany’s largest cable network company, Kabel Deutschland Holding AG. Liberty Global Inc. has outbid Vodafone Group Plc.’s (VOD) offer of €7.2 billion (approximately $9.6 billion) by making a counter offer of €7.5 billion (approximately $10 billion).
However, Vodafone plans to make its offer more attractive after being refused by Kabel Deutschland.
At present, the German television broadcast market is dominated by Kabel Deutschland and Liberty Global Inc., which has taken a number of strategic steps to strengthen its position and continue business restructuring. In this regard, the company has already acquired German cable TV aces namely, UnityMedia GmbH and Kabel Baden-Wuerttemberg GmbH & Co KG.
Kabel Deutschland is worth of €8 billion and covers over 8 million German households. It offers wireline services like HD and analog TV, Pay-TV and broadband Internet with speeds up to 100 Mbps and fixed-line voice services through cable as well as wireless services through industry collaborations.
Hence, we believe that the acquisition of Kabel Deutschland will further strengthen Liberty Global’s market position and deliver strong top-line growth.
A few days back, Liberty Global also acquired the British cable MSO, Virgin Media, for a total consideration of $15.8 billion or an enterprise value of nearly $23.3 billion. The acquisition makes Liberty Global the largest cable TV MSO (multi service operator) in the world, surpassing Comcast Corp. (CMCSA), the largest cable MSO of the U.S. Together, Liberty Global and Virgin Media will have approximately 25 million subscribers compared with nearly 22 million subscribers of Comcast.
In the U.K., the merged entity will become a formidable challenger to British Sky Broadcasting Group plc, which is the largest pay-TV operator in the U.K. and is partially controlled by News Corp. (NWSA).
However, we remain concerned about the company’s highly leveraged balance sheet. The $29.6 billion debt appearing on its balance sheet at the end of the first quarter of 2013, may impede the company’s future acquisition plans.
Currently, Liberty Global has a Zacks Rank #5 (Strong Sell).
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