24 December 2020

Vodafone buys Kabel Deutschland shares from Elliott: Will a squeeze-out of the minority shareholders follow?

by Attorney-at-law Martin Arendts, M.B.L-HSG

The telecommunications group Vodafone has reached an agreement with the hedge fund Elliott and two other Kabel Deutschland shareholders, D. E. Shaw and UBS O'Connor LLC, to buy their shares. All three together hold 17.1 % of Kabel Deutschland. Vodafone can now take over this portion for EUR 103 per share.

Vodafone announced the takeover of Kabel Deutschland in June 2013 and completed it in spring 2014. At that time, Vodafone had offered EUR 84.53 per Kabel Deutschland share. For the domination and profit and loss transfer agreement (DPLTA) concluded afterwards (with Kabel Deutschland as the controlled company) after reaching 77 %, there is an award procedure that is currently pending before the Munich Higher Regional Court (Oberlandesgericht), see: https://spruchverfahren.blogspot.com/2020/12/spruchverfahren-zum-beherrschungs-und_23.html

Under the domination agreement, the management board of Kabel Deutschland was given an instruction to revoke the admission of the company's shares to trading in the regulated market and to trading in the market with additional post-admission obligations (Prime Standard): https://spruchverfahren.blogspot.com/2015/09/kabel-deutschland-holding-ag-weisung.html

As an "activist" shareholder, Elliott was able to enforce two special audits at Kabel Deutschland. The report of the last special audit was presented to the Annual General Meeting in November: https://spruchverfahren.blogspot.com/2020/10/sonderprufungsbericht-auf-der.html

After the most recent purchase, Vodafone has 93.8 % of Kabel Deutschland. The logical next step in the integration of Kabel Deutschland would be to exclude the remaining minority shareholders, i.e. a squeeze-out under merger law (threshold: 90 %) or - after the purchase of additional shares - a squeeze-out under stock corporation law (threshold: 95 %).

Munich Higher Regional Court, file no. 31 Wx 190/20
County Court of Munich I, decision of November 27, 2019, file no. 5 HK O 6321/14
Vogel, E. et al. ./. Vodafone Vierte Verwaltungs AG
80 applicants
joint representative: Attornea-at-law Dr. Franz L. Heiss, 80801 Munich
Legal representative of the respondent, Vodafone Vierte Verwaltungs AG:
Lawyers Linklaters LLP, 40212 Düsseldorf

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