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Vodafone offers $2.6bn to end German legal fight

Suban Abdulla
·2-min read
29 October 2018, North Rhine-Westphalia, Neuss: A car driving past a 5G antenna on a test site. Vodafone has put its first 5G mobile station into operation. Photo: Oliver Berg/dpa (Photo by Oliver Berg/picture alliance via Getty Images)
On completion, Vodafone will own almost 94% of KDG’s outstanding shares. Photo: Oliver Berg/dpa via Getty Images

Vodafone Group (VOD.L) has offered to buy out the remaining minority shares in Kabel Deutschland Holding (KD8.HM) in a deal worth $2.6bn (£1.9bn).

The deal announced on Tuesday will see the British telecommunications firm end a lengthy legal battle over its 2013 takeover of the German company.

The offer will “reduce Vodafone's exposure to ongoing legal proceedings related to the KDG acquisition,”Vodafone said.

As part of the agreement, Vodafone will give minority shareholders, including Elliot Management Corp €103 ($125,79, £93.67), for each share, a company statement said.

Vodafone said that the deal has been accepted by shareholders representing 17.1% of shares, which valued all remaining minority holdings in Germany’s largest cable company at up to €2.12bn.

On completion, Vodafone will own almost 94% of KDG’s outstanding shares. But, the offer will be conditional on clearance under German foreign investment legislation.

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In 2013, Vodafone bought nearly 77% share in KDG through an initial public offering (IPO), but was blocked from buying the rest by existing shareholders.

As a result, it entered into a domination and profit and loss transfer agreement in December 2013, taking effect on 1 April 2014. This Vodafone Germany and KDG to integrate.

The previous agreement also required Vodafone to pay compensation to the investors who hadn’t tendered.

Previously, it paid minority shareholders €3.17 per KDG share annually in cash and had agreed to buy them out at €84.53 per share, with the offer price increasing every year.

At the instigation of the KDG minority shareholders, the Munich District Court (MDC) considered the adequacy of the mandatory cash offer made to minority shareholders in Vodafone's takeover of KDG.

In 2019, the MDC ruled that the compensation Vodafone paid was "adequate" given KDG's earnings potential based on an outlook set out by the Board of KDG in November 2013.

The ruling saw a number of KDG minority shareholders appeal the decision, which triggered an appeals process which is expected to take several years to complete.

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