Virgin Media owner marches into Vodafone with £1.2bn stake
Liberty Global, the US group that owns 50% of Virgin Media O2 in the UK, has bought a 4.92% in the Vodafone group.
The company, which spent £1.2 billion on the stake, insisted that it does not intend to seek board representation at Vodafone and said no regulatory approvals are required for an investment at this level.
Mike Fries (pictured), CEO of Liberty Global, said: “We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities.”
The company said: “It is not considering an offer for Vodafone.” That bans it from making an offer – or possible offer – for six months, until August 2023, unless Vodafone agrees or unless another company makes a bid.
Liberty Global said its investment in Vodafone is part of its investment portfolio of more than 75 companies and funds, “including stakes in companies such as ITV, TelevisaUnivision, AtlasEdge, Plume, and the Formula E racing series”.
Fries said: “We continue to remain disciplined about our capital and fully expect that the equity used to fund this investment will be replenished with the sale [by Vodafone] of certain non-core assets over time.”
In recent months Vodafone has sold its Hungarian business for €1.7 billion to a state-controlled operation, and its operation in Ghana for US$900 million to Telecel.
In response to Liberty Global’s purchase, Vodafone shares rose to £0.98 from £0.91 last night, but that is still way down on the £1.39 a year ago. The decline in the group’s share price was one of the factors in the departure of Nick Read as CEO at the end of last year, to be replaced as interim CEO by CFO Margherita Della Valle.
Analyst Kester Mann of CCS Insight said: “The investment by Liberty Global reflects Vodafone’s low share price, which has been in steady decline for several years. It also follows other recent investments in the UK telecoms company: Middle East operator e& now has an approximate 13% stake in Vodafone and French billionaire Xavier Niel has 2.5%.”
He added: “Although today’s deal appears opportunistic, it also raises questions as to what will be the US company’s next move in Europe. One option could be to buy Vodafone out of its 50/50 Dutch joint venture, VodafoneZiggo.”
Fries has also previously expressed interest in merging VodafoneZiggo with Belgian operator Telenet, noted Mann, describing that as “a scenario that could become more attractive following recent positive comments from the European Union regarding pan-market consolidation”.
Paolo Pescatore, of PP Insight, noted that, for now, “this is a pure financially driven opportunistic move”, but he warned: “We cannot rule other moves in the future.”
He said Fries “is a shrewd operator and has a proven track record of delivering on these sorts of deals”, but noted the pressure on Vodafone to find a replacement for Read. “There are numerous challenges at Vodafone which explains why finding a successor is taking some time.”