Liberty’s Global Expansion Hits Snag

Liberty’s Global Expansion Hits Snag

Liberty Global’s plan to purchase the nearly 50% of Telenet Group it doesn’t already own hit a snag last week, after the Belgian cable operator rejected Liberty’s $2.5 billion offer as too low.

Liberty Global, headed by cable legend John Malone, first announced its intention to buy the remainder of Telenet’s shares on Sept. 19 for about $45.30 each. At the time, Liberty Global said its offer represented a 14% premium to Telenet’s average trading price for the previous 30 days and was 23% above the midpoint discounted cash flow (DCF) valuation of the company of $36.92 per share.

Telenet immediately formed a committee of independent directors to evaluate the proposal, which then hired Lazard SPRL to conduct an independent valuation of the company.


Lazard valued Telenet at $48 to $55 per share, considerably higher than Liberty’s valuation.

Liberty Global said in a statement that it would hold its ground and remove the self-imposed requirement that 95% of Telenet shareholders approve the deal. That will allow Liberty to obtain a greater majority of Telenet shares simply by purchasing them on the open market, which could freeze out some minority shareholders.

“Liberty Global considers the offer price to be highly attractive for Telenet shareholders and intends to proceed with the intended offer as soon as practically possible, irrespective of the recommendation expressed by the independent directors of Telenet,” Liberty said in a statement. LGI also disputed Lazard’s valuation, claiming that it was based on assumptions that “cannot be reasonably achieved or implemented.”

Pivotal Research Group principal and media and communications analyst Jeff Wlodarczak said Telenet’s senior management was being “ultra aggressive” in trying to secure a higher bid from Liberty, including raising its guidance twice and not informing board members of the changes.

Telenet has about 2.2 million customers in Belgium, mainly in Brussels and Flanders. Those subscribers would further solidify Liberty Global’s dominance of the European cable market: It is currently the largest cable operator on the continent, with about 20 million customers.