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Hedge Funds Plan To Sue Vodafone After Kabel Deutschland’s Deal

By Mani
Updated on

Three hedge funds plan to sue Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD) for a better price for their outstanding holdings in Kabel Deutschland Holding AG (OTCMKTS:KBDHF) (FRA:KD8) (ETR:KD8).

Hedge Funds Plan To Sue Vodafone After Kabel Deutschland's Deal

Arno Schuetze of Reuters feels that Elliot Management—along with other shareholder hedge funds Davidson Kempner and York Capital—are planning to initiate legal action to force Vodafone to fork out a higher price during the next phase of the buyout.

Vodafone Win Kabel Deutschland Bid

As reported earlier, Vodafone Group Plc (ADR) (NASDAQ:VOD) was able to achieve the 75 percent acceptance level to get its buyout of Kabel Deutschland Holding AG (OTCMKTS:KBDHF) approved. Vodafone can add to its growing empire with this new acquisition of Germany’s largest cable network.

To support Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s bid for Kabel Deutschland Holding AG (OTCMKTS:KBDHF) (FRA:KD8) (ETR:KD8), Elliot Management tendered part of its stake. However, Reuters reports that Elliot Management and the other two hedge funds are planning legal action to force a higher price from Vodafone during the next stage of the buyout.

Vodafone’s Enlarged Presence In Europe

Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s bid for Kabel Deutschland Holding AG (OTCMKTS:KBDHF) (FRA:KD8) (ETR:KD8) is intended to offer more television and fixed-line services in its largest European market.

Earlier, Verizon Communications Inc. (NYSE:VZ) confirmed on September 2 that it has reached a deal with Vodafone group to acquire Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s 45 percent stake in Verizon for $130 billion. The deal includes 50 percent of the price paid in cash and the remaining 50 percent paid in Verizon stock. The deal is expected to be closed in the first quarter of 2014.

Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD)’s strategy to acquire Verizon Wireless was to focus on its business in Europe and emerging markets.

Elliot’s Past Strategies

In the past, Elliot Management accumulated large shareholding blocks in order to try to extract a higher price, either from the public tender or in the period after the takeover when Vodafone has to put forward a valuation for the Kabel Deutschland Holding AG (OTCMKTS:KBDHF) (FRA:KD8) (ETR:KD8) shares it doesn’t own.

In 2011, Elliot Management pushed DuPont into raising its offer for Danish food ingredients maker DANISCO CO (OTCMKTS:DNSOF) after building a 10 percent stake.

Eyk Henning of The Wall Street Journal feels Elliot Management’s strategies could be that the hedge fund might be looking for a ‘backend battle’ to squeeze more cash out of Vodafone Group Plc (ADR) (NASDAQ:VOD) (LON:VOD).

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