Elliott Demands New Kabel Deutschland Audit Amid Dispute

Kabel Deutschland Holding AG shareholder Elliott Management Corp. called for a new audit of Vodafone Group Plc’s $11 billion takeover of the German cable company as the hedge fund seeks more money from the acquirer.

The activist investor also called for a shareholder meeting in which Kabel Deutschland should explain an auditor’s report that said the acquisition undervalued the company.

“The findings of the special auditor’s report contain troubling allegations that pertain to the fair valuation of KDG and to breaches of duty by the company’s management and supervisory boards,” Elliott said today. A review of management action would “clear up the severe allegations raised in the report.”

Kabel Deutschland received the request and will call an extraordinary shareholder meeting “assuming it meets the legal requirements,” Ben Padovan, a spokesman for Newbury, England-based Vodafone, which controls Kabel Deutschland, said in an e-mail.

Elliott, based in New York, has held on to its Kabel Deutschland shares amid the takeover and wants Vodafone to pay more than the 87 euros ($103) a share including a dividend that investors received. Elliott is suing Kabel Deutschland in a German court, saying Vodafone should have paid more than 250 euros a share. Elliott owns 13.5 percent of Kabel Deutschland.

‘Unrealistic’ Valuation

An independent review proposed by Elliott suggests Kabel Deutschland should have been worth 104 euros a share, according to the Sept. 29 report by Frankfurt-based auditor Constantin GmbH that was released to investors last month. Cost savings and extra revenue after the acquisition could add about 23.50 euros to that value, Constantin said.

“The Elliott-proposed special auditor’s conclusions on a theoretical KD takeover price are unrealistic,” Padovan said. The deal “was recommended by KD’s boards taking into account the views of their investment-banking advisers.”

The audit, commissioned at Kabel Deutschland’s shareholder meeting in October 2013, took a year to complete as Constantin sifted through non-public communications among company executives.

Vodafone said that an independent auditor assigned Kabel Deutschland a value of 75.76 euros a share and a “volume-weighted average share price” of 84.53 euros.

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