British telecommunications giant Vodafone (VOD) brokered a deal to buy German cable operator Kabel Deutschland for $10.1 billion beating out an offer from rival Liberty Global (LBTYA). This purchase will be the biggest buyout undertaken by Vodafone since 2007, when they spent $11 billion to buy a controlling interest in Hutchison Essar of India. In 2000 Vodafone purchased German wireless German rival Mannesmann for $183 billion, making Vodafone at the time the fourth biggest company in the world.
This move will expand Vodafone’s operations significantly. Kabel Deutschland is Germany’s number one cable provider, and according to a company statement, the combined operations will provide cell phone service for 32 million customers, plus 5 million for broadband and 8 million for cable.
Coupled with being outbid by Vodafone, Liberty currently faces a downgrade from Moody’s, who cite Liberty subsidiary Virgin Media's “weakened credit profile.” Liberty bought Virgin Media for $16 billion in April 2013. Liberty still has a chance to make an appeal to investors for a counter offer, though it will be tough to match. Liberty offered $10 billion for Kabel Deutschland in the form of cash and shares last week. Vodafone made their $10.1 billion offer in cash only.
Following the acquisition announcement, Vodafone’s stock has remained unscathed on an overall sour day for the market. While the S&P 500 has tumbled 1.3 percent , Vodafone has remained essentially flat, maintaining its opening day price of $27.27 a share amidst moderate volume.
Liberty Global has not fared as well. Liberty’s stock has dropped .64 percent to $69.66 a share.
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