By Arno Schuetze
FRANKFURT, Sept 13 (Reuters) - Three hedge funds whotendered shares enabling Vodafone to successfully bidfor Germany's largest cable firm plan to sue for a better pricefor their outstanding holdings, three financial sources withknowledge of the matter said on Friday.
Vodafone, which wants Kabel Deutschland in orderto offer more television and fixed-line services in its largestEuropean market, said late on Thursday it had secured more than75 percent of shares in the company, a condition for its 7.7billion euro ($10 billion), 87 euro-per-share, offer.
Kabel Deutschland's biggest shareholder, Elliott Management,tendered part of its stake in order that the offer shouldsucceed. Now it, along with shareholder hedge funds DavidsonKempner and York Capital, plans legal action in the hope that acourt will force Vodafone to offer a higher price in the nextstage of the buyout, said the sources with knowledge of thehedge funds' plans.
Elliott, Davidson Kempner and York Capital declined tocomment. Vodafone also declined to comment.
Vodafone's original offer for Kabel Deutschland ended onSept. 11, but Kabel Deutschland shareholders who have notaccepted the offer may still do so between Sept. 17 and Sept.30. Under German takeover law, Vodafone now has to offer abuyout price to remaining shareholders. That buyout price isunlikely to be significantly higher than its original offer andcan be challenged in court.
Vodafone's original offer came under fire from U.S. activistinvestor Paul Singer, founder and CEO of Elliott Management.According to one of the three financial sources, who is familiarwith Singer's thinking, the investor believes the offerundervalues Kabel Deutschland, though he has not specified whathe sees as an adequate valuation.
Elliott increased its Kabel Deutschland stake to 10.9percent ahead of the offer deadline. Davidson Kempner holds 3.4percent. York Capital also holds a Kabel Deutschland stake, oneof the sources said, though the hedge fund itself declined tocomment on whether or not it did.
The tactic that the hedge funds are pursuing in the KabelDeutschland deal replicates what Elliott did in the takeover ofGerman crane maker Demag by U.S.-based rival Terex twoyears ago. That court decision is still pending.
In 2011, Elliott pushed DuPont into raising its offerfor Danish food ingredients maker Danisco afterbuilding a 10 percent stake.
Vodafone is scheduled to publish details of the number oftendered shares on Monday.
Earlier this month the British company agreed the sale ofits stake in U.S. operator Verizon Wireless for $130billion as part of its strategy to focus on its businesses inEurope and emerging markets. The Kabel Deutschland deal is partof their effort to buy broadband assets in Europe to complementtheir mobile business.
Shares in Kabel Deutschland rose 6 percent on Friday, asinvestors hoping to benefit from a potential higher payout fortheir shares, flocked to buy the stock.