Liberty Global sells European operations to Vodafone for $22.7bn

09 May 2018 | Natalie Bannerman

Liberty Global has entered into a definitive agreement to sell its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone Group for $22.7 billion.

Once completed Liberty Global will still remain one of Europe’s leading cable television and broadband provider, with operations in the UK, Ireland, Belgium, Switzerland, Poland and Slovakia.

"The transaction appropriately values our core cable operations at a double digit OCF multiple and will deliver $12.7 billion of estimated cash proceeds to Liberty Global," said Mike Fries, chief executive officer of Liberty Global. "Plus, we will retain all cash generated from the four businesses through closing. In Germany alone, which we value at 12 times 2017 adjusted segment OCF, we will have generated over six times our original investment, supported by exceptional operating performance over the last seven years during which we grew revenue 60% and OCF 82%."

The four businesses represent approximately 28% of Liberty Global’s consolidated 2017 operating cash flow and Vodafone is said to be acquiring Liberty’s German business inclusive of its debt.

"This is also an important and exciting transaction for our customers and employees," continued Fries. "In each of these markets, the combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers. Now more than ever, Europe needs strong competition from scaled national challengers willing and able to invest in next-generation wireless, video and broadband services.

Upon closing a change of control will occur with respect to Unitymedia’s debt, at which time lenders and bondholders will have the option to put their debt to Vodafone.

"Germany, for example, is dominated by one provider that controls over half the broadband market. As a result, innovation and investment lag other countries in Europe, impacting customer service, next-generation product deployment and broadband speeds. Even together, Liberty Global and Vodafone, whose cable networks don’t compete or overlap, will be half the size of the incumbent operator. It’s time to alter market dynamics by unleashing greater investment and competition."

In addition, Liberty Global will continue to provide certain transitional services for a period of up to four years after the transaction. These services will be largely network and information technology-related functions.

The transaction will be reviewed by the European Commission for regulatory approval, which is expected to happen in mid-2019.

Topics: Liberty Global, Vodafone Group, Germany, Hungary, Romania, Czech Republic, Mike Fries