Hedge Fund Elliott Sues Kabel Deutschland Over Vodafone

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Kabel Deutschland Holding AG shareholder Elliott Management Corp. said its funds filed a complaint to a German court, demanding access to a document related to the cable company’s takeover by Vodafone Group Plc last year.

Elliott filed the lawsuit to the Munich regional court, seeking a special auditor’s report that “apparently examined several statements and actions” of Kabel Deutschland concerning the purchase and the valuation of the shares during the takeover offer, New York-based Elliott said today.

While Kabel Deutschland said on Oct. 9 that it would release the report to shareholders, it found the document contained “personal data of employees or commercially sensitive” information, it said in an e-mailed statement. “We expect the special auditor to react accordingly and then Kabel Deutschland will send this report to any shareholder that requests it,” the company said.

Elliott is an activist investor that buys stakes in businesses it deems undervalued. Vodafone agreed to buy Kabel Deutschland in a $10 billion transaction that was completed in October last year. Elliott funds were among investors that held out from tendering their shares, betting on forcing a higher price from the U.K. mobile-phone company.

Vodafone said it owned about 77 percent of Kabel Deutschland’s shares at the end of March. Elliott had a stake of more than 13 percent in April, according to data compiled by Bloomberg.

Elliott Actions

“First, Vodafone tried to cancel the special audit,” Elliott said. “Next, the management of KDG criticized the special auditor’s report at the company’s most recent AGM. Now, the management is refusing to provide shareholders with access to the report. This pattern of obstructing shareholder attempts to gain transparency into the Vodafone transaction is unacceptable and lacking any legal basis.”

A spokesman for the court said that while the complaint isn’t in its computer system yet, that doesn’t mean it hasn’t been received as the process may take one or two days.

Kabel Deutschland isn’t the only group that’s run afoul of Elliott lately. This month, Elliott called on EMC Corp. to spin off its software company VMware Inc., nominated a suite of directors to Family Dollar Stores Inc.’s board in an attempt to push the company to sell to rival Dollar General Corp. and sought contempt orders against Argentina in a bond dispute.

Elliott, which is run by billionaire Paul Singer, manages two hedge funds that combined have more than $24 billion of assets under management, according to the company.