Finally, after much speculation that the deal may not follow through, Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) was able to achieve the 75% percent acceptance level to get its buyout of Kabel Deutschland Holding AG (FRA:KD8) (ETR:KD8) approved, Reuters reports. Vodafone can add to its growing empire with this new acquisition of Germany’s largest cable network.
Vodafone would be able to buy the German company
In a late night share tally in Frankfurt, and the tedious process of counting and confirming tenders, the British telecom major announced that it has reached the 75 percent threshold of shareholder approval. Votes were counted throughout the afternoon today, and it was finally announced that Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) would indeed be able to buy the German company. Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) offered 87 euros/share (or 84.5 euros/share excluding dividend) for Kabel Deutschland Holding AG (FRA:KD8) (ETR:KD8). There was also some speculation that the process of confirming votes could go on for a longer period of time as the newly increased position of Elliott Management may not have been registered yet as a valid voting right.
What is Paul Singer’s Elliott doing?
Now that Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) has gotten through the major hurdle that stood in its way of buying Kabel Deutschland Holding AG (FRA:KD8) (ETR:KD8), the more interesting question is whether activist investor Paul Singer tendered his entire holding in Kabel yesterday, or if he is holding out on some. Elliott’s position was valued at 800 million euros when he disclosed a larger stake of 10.9 percent in Kabel Deutschland. If he sold his entire position for $87/share, he could have netted close to 850 million euros for it.
However, the hedge fund could squeeze even more out of the deal if it kept some part of its holding to itself. Elliott can go to court along with other shareholders who did not sell to Vodafone Group Plc (NASDAQ:VOD) (LON:VOD), and ask for a greater price on their held-out positions. German law allows shareholders who did not participate in the buyout to demand more money on their stakes, according to a so-called domination and profit-transfer agreement. We all are abundantly familiar with Elliott’s experience in being the holding-out entity and then taking its battles to court. However, this is mere speculation—Elliott has made no comments on the transaction as yet.
Elliott has done this before
Yes, he has played this game before. According to an old story pulled from Reuters, Elliott sued Terex Corporation (NYSE:TEX), along with 100 other shareholders, to demand compensation for their non-tendered holdings. Terex acquired the German company, Demag Cranes AG last year. Elliott held 12.7 percent of Demag Cranes and, along with others, demanded a compensation of 100 euros/share when Terex’s original bid for Demag was at 45.50 euros/share.
Since German law requires the buying company to pay compensation, the courts usually side with shareholders. That said, judges do not tend to agree with the high claims of payments of the stakeholders and decide mid-way. In this case, Terex had acquired 82 percent of Demag before it was sued to pay more to the holders of the remaining 18 percent.
The story is so similar in this case as well. There is again a German company where Elliott has a large position, and it has been acquired in exactly the same fashion. While people close to the Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) transaction have said that Elliott would have had to tender some of its position for the votes to reach the 75 percent threshold, it wouldn’t be a surprise if it did not tender any.
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