Liberty Proceeds With Telenet Deal Amid Valuation Dispute

Liberty Global Inc. doesn’t plan to change its offer to buy out the shares of Belgium’s Telenet Group Holding NV for 35 euros ($45) a share, despite a Lazard Ltd. report saying the company is worth 37 euros to 42 euros.

Liberty announced plans last month to buy the almost 50 percent of Telenet that it doesn’t already own for a total of about 2 billion euros. Lazard, a financial advisory firm, was hired to assess the shares under Belgian takeover rules. Liberty, a cable company led by billionaire John Malone, said yesterday that Lazard’s methodology was flawed.

“Liberty Global has serious reservations regarding the long-term business plan assumptions that were used in the valuation report prepared by Lazard,” the Englewood, Colorado-based company said yesterday in a statement. “Liberty Global believes that these assumptions form a speculative plan that cannot be reasonably achieved or implemented.”

The U.S. company, working with Morgan Stanley, values the Belgian cable provider at 28 euros to 35 euros a share, according to the statement. It also removed the 95 percent requirement for acceptance of the offer.

Shares Drop

“Liberty Global continues to believe that the offer price represents a meaningful premium to its view on the intrinsic value of Telenet and a unique opportunity for the shareholders to monetize their entire investment at a time when the European cable sector is trading at a multiyear high,” Liberty Global said.

Telenet dropped as much as 1.8 percent to 35.22 euros in Brussels and was down 1.1 percent as of 10:23 a.m. Liberty Global dropped 1.9 percent to the equivalent of $59.42 in Frankfurt trading. The stock closed at $60.40 on Oct. 26 in the U.S. and didn’t trade yesterday because New York markets were shut in anticipation of a tropical storm.

Telenet’s Response

Telenet’s board of directors is preparing a response to Liberty Global that will argue its valuation is higher than Liberty’s offer, the company said in a separate statement. The Swiss bank UBS AG is assisting in the preparations.

Vincent Bruyneel, a spokesman for Telenet, declined to comment on Liberty’s statement.

The current offer values Telenet at 5.6 times its earnings before interest, taxes, depreciation and amortization. That compares with a median multiple of 5.3 for 114 telecommunications deals in Western Europe in the past year.

The deal would increase Liberty’s role in Europe, already its biggest market for cable customers. The transaction also would allow Liberty to save money from duplicate operations and take advantage of “untapped synergies,” Liberty Chief Executive Officer Mike Fries said last month.

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