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LONDON (Alliance News) - FTSE 100-listed telecommunications firm Vodafone PLC said on Wendesday it has agreed to acquire Liberty Global's operations in Germany, the Czech Republic, Hungary and Romania for an enterprise value of EUR18.4 billion.
This is expected to comprise EUR10.8 billion in cash paid to Liberty Global and the assumption of EUR7.6 billion in existing Liberty debt, subject to completion adjustments.
Libery's operations include Unitymedia in Germany, UPC Czech, UPC Hungary and UPC Romania.
Unitymedia is the second largest cable operator in Germany, Vodafone said, with 13.0 million homes passed. Of these, 11.0 million are currently marketable, reaching 12 of the largest 20 cities in Germany. Unitymedia provides services to 7.2 million unique customers.
UPC Czech and UPC Hungary are the largest cable operators in the Czech Republic and Hungary, Vodafone continued, with 1.5 and 1.8 million homes passed, representing 33% and 43% of total households, respectively.
UPC Romania is the second largest next generation network operator in Romania, with 3.1 million homes passed, or 41% of total households.
"The combination of Vodafone and Unitymedia's non-overlapping regional operations will establish a strong second national provider of digital infrastructure in the German market," Vodafone said.
Meanwhile, in the Czech Republic, Hungary and Romania the deal will complement Vodafone's existing operations. In these markets, Vodafone said, the combined businesses will reach over 6.4 million homes and will serve 15.8 million mobile, 1.8 million broadband and 2.1 million TV customers.
Estimated cost and capital expenditure synergies of approximately EUR535 million per year - before integration costs - are expected by the fifth year post-completion of the deal.
"These savings are similar in nature to those generated by the successful integrations of Kabel Deutschland in Germany and ONO in Spain. The principal efficiencies derive from network integration, IT/billing simplification, procurement, and consolidating overlapping functions," Vodafone noted.
"Further savings will be driven in Germany from the migration of Vodafone's existing overlapping fixed line DSL customer base to the Unitymedia cable network," the company added.
Total integration costs of approximately EUR1.2 billion will be incurred over the first five years post-completion to achieve these synergies.
Vodafone said it intends to finance the acquisition using existing cash, new debt facilities and around EUR3 billion of mandatory convertible bonds.
"This transaction will create the first truly converged pan-European champion of competition. It represents a step change in Europe's transition to a Gigabit Society and a transformative combination for Vodafone that will generate significant value for shareholders," said Vodafone Chief Executive Vittorio Colao.
The transaction is subject to regulatory approval, Vodafone said, and is expected to complete around the middle of 2019.
"The Vodafone and Liberty Global businesses are highly complementary in each country. There is limited overlap and, therefore, no negative impact on competition resulting from the transaction," Vodafone noted.
A break fee of EUR250 million will be payable by Vodafone, in certain circumstances, if the transaction does not complete. The deal is not subject to Vodafone or Liberty shareholder approval.
Vodafone on Wednesday also reconfirmed its intention to grow its dividend annually, which will be "further supported" by the expected accretion to free cash flow following the Liberty deal.
The deal was first reported by the Financial Times on Tuesday.
