Vodafone share price: Kabel Deutschland acquisition undervalued German business

on Dec 9, 2014
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iNVEZZ.com, Tuesday, December 9: Vodafone Group Plc’s (LON:VOD) acquisition of Kabel Deutschland undervalued Germany’s largest cable operator, according to an independent auditor’s report. The report cited financial projections by investment banks, which suggested that the takeover price should have been €104 a share, not including additional synergy effects estimated at up to €19.50 per share. This is significantly higher than the agreed takeover price of €84.53 a share.

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“The discrepancy between the investment banks’ considerations of the company’s value and the takeover price paid by Vodafone is not plausible according to the findings of the report,” the auditor wrote, as quoted by Reuters, which reported on the story earlier today.
The report’s conclusions may provide support for the case of hedge fund Elliott Management Corp, a shareholder holding a 13.5-percent stake in Kabel Deutschland, which has disputed the takeover price and refused to sell its holding. In October Elliot filed a complaint in a German court against the takeover. The New York hedge fund claimed that Vodafone should have paid more than €250 a share and accused Vodafone of illegally withholding the auditor’s report.
The British mobile phone firm described the price suggested in the report as unrealistic. The company told Bloomberg in an emailed statement: “The special auditor picks only the highest value from a wide range of valuations and ignores lower, more reasonable expectations.”
In today’s trading, Vodafone shares were down 2.1 percent at 225.10p, as of 10:15 UTC. According to the Financial Times, the 24 analysts offering 12 month price targets for Vodafone have a median target of 237.50p, with a high estimate of 280.00p and a low estimate of 130.00p. The current consensus forecast suggests that the company will outperform the market.

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