Liberty Said Unlikely to Counter Vodafone on Kabel Deutschland

Billionaire John Malones Liberty Global Plc (LBTYA) is unlikely to raise its offer for Kabel Deutschland Holding AG (KD8) after Vodafone Group Plc (VOD) agreed to buy the German cable company, people with knowledge of the matter said.

Liberty, which made a preliminary offer for Kabel Deutschland last month, recognizes its bid would face antitrust obstacles and considers Vodafones offer expensive, said the people, who asked not to be identified because the talks are private. The company hasnt made a final decision, they said.

Vodafone announced June 24 that it planned to buy Kabel Deutschland after increasing its bid for Germanys largest cable company to 87 euros a share, or 7.7 billion euros ($10.1 billion). Liberty, whose offer a week earlier was said to be valued at 85 euros a share, hasnt been in touch with Kabel Deutschland executives since the agreement with Vodafone, said another person familiar with the matter.

Liberty already owns Germanys no. 2 cable operator after combining Unitymedia and Kabel Baden-Wuerttemberg GmbH last year, making antitrust approval difficult, the people said. While Vodafones offer is all-cash, Liberty proposed a complex structure that involved injecting Malones existing cable assets into Kabel Deutschland, people familiar with the matter said earlier.

Kabels board is set to recommend the offer from the U.K. company, in what would be the second-biggest takeover of a telecommunications network in Europe this year, according to data compiled by Bloomberg.

Mobile operators are looking to acquire fixed-line assets as smartphone adoption slows and heavy regulation restrains wireless profits. Last year Vodafone agreed to buy the U.K.s Cable & Wireless Worldwide Plc to cope with surging data traffic on its own network in its home country.

Marcus Smith, a spokesman for London-based Liberty, and Insa Calsow, a spokeswoman for Kabel Deutschland, based near Munich, declined to comment.

The odds of Liberty success seem slimmer and slimmer, Robin Bienenstock, an analyst with Sanford C Bernstein in London, said in a July 1 note. German regulators would probably subject the deal to a heavy review and Kabel Deutschlands board has welcomed the Vodafone bid, she said.

Vodafones 87-euro offer is 37 percent more than Kabel Deutschlands closing price on Feb. 12, the day before Vodafones interest was initially reported. Liberty considers that a high price based on earnings multiples, the people said.

Kabel Deutschland shares fell 0.2 percent in Frankfurt to 83.87 euros today. Liberty increased almost 1.7 percent to $75.65 at yesterdays close in New York.