Kristen Schweizer and Amy Thomson London
LIBERTY Global chairman John Malone said a tie-up with Vodafone Group would be a “great fit” for his cable empire in western Europe, the billionaire’s first public comments on a long-mooted combination of the carriers.
“We’ve looked at that from our side and there would be very substantial synergies if we could find a way to work together or combine the companies with respect to western Europe,” he said.
Comparing Vodafone to “a big banana in the jar”, Malone said: “The question is: how do you get your hand out of the jar with the banana.”
Malone cited benefits of a merger in markets such as Germany, the UK and the Netherlands. At market prices, Vodafone’s equity is valued at $93 billion (R1.1 trillion), compared with $45bn for Liberty Global.
Including debt, Liberty Global has an enterprise value of about $88bn. He declined to comment on whether the companies are in discussions.
He added that from shareholders’ perspective, there were “huge differences” in how the two telecommunications and media empires were run.
“The principal barrier to us, and I’m talking philosophically here – I’m not making an offer to anybody – philosophically, you have a different view of how a large company should capitalise itself,” Malone said. “Their philosophy is low leverage, low risk and high cash payout to their shareholders. I prefer to grow equity value.”
‘Big banana’
“Is there a great fit in Germany? Absolutely. Is there a great fit in the UK? Absolutely. Is there a great fit in Holland? Absolutely,” Malone said. “There’s the promise of creating enormous shareholder value if we could work it out.”
Vodafone shares rose as much as 3.5 percent for their biggest gains in four months. They traded 3 percent higher at £2.33 (R43) as of 8.07am in London. Liberty Global closed 2.3 percent higher at $53.11 in New York.
Vodafone has considered a tie-up with Liberty Global as it looks to cut its reliance on its cellular phone business, which has suffered because of a fierce price war in Europe. Liberty Global’s interest in a potential deal with Vodafone reflects a deeper shift in strategy at a media and broadband firm that until recently has shied away from owning mobile-phone networks. – Bloomberg