Vodafone - Kabel Deutschland Merger

by Christoph Beck

Institution: Universidade Nova
Year: 2014
Keywords: German telecommunications industry; Quad-Play trend; Synergy credibility and premium paid
Record ID: 1323676
Full text PDF: http://www.rcaap.pt/detail.jsp?id=oai:run.unl.pt:10362/11698


A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics This work project aims to analyse the acquisition of German cable operator Kabel Deutschland by the British telecommunications company Vodafone in September 2013. Analysis of the technologies and German telecommunications sector reveals the sources that motivate a transaction. The acquirer needs to find a way to react to the increasing demand for data on internet connections. Also, Vodafone has a weak infrastructure of fixed line and thus is missing a strong network to be able to offer the full Quad-Play services (TV/Fixed-Phone/Internet/Mobile). The acquisition target is a company with a strong cable network in place that is a good alternative to provide modern internet connections. Both companies seem to be highly complementary and would benefit from a merger by getting an improved competitive position and readiness for the Quad-Play trend. The offer price per share is with €87 per share 24% above the standalone DCF valuation and represents an attractive premium for target shareholders. Discounting the claimed Synergies by acquirer Vodafone result in an NPV of €4.5 billion. This means that Vodafone is paying away 33% of the Synergies to the target. However, Vodafone shareholders can still expect to gain from the investment as cost synergies seem credible and sufficient to cover the premium.