Liberty Global buys stake in Vodafone betting on share revival

Liberty Global Plc said it has acquired a 4.9% stake in Vodafone Group Plc in a surprise bet that the rival British telecom group’s plans to strike deals and revamp its business will lead to a better share price.

Liberty Global, which acquired 1.34 billion shares in Vodafone, said that it isn’t considering an offer for the Newbury, England-based telecom group in a statement on Monday.

Vodafone, whose share price has sunk about 32% in the last 12 months, has attracted a number of strategic investors in recent months, including French billionaire Xavier Niel and United Arab Emirates-backed Emirates Telecommunications Group Company PJSC, known as e&, which has slowly increased its position to 13%.

Former Chief Executive Officer Nick Read was ousted in December and his interim replacement, Margherita Della Valle, said the company “can do better” in her drive to return it to growth.

“We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities,” Liberty Chief Executive Officer Mike Fries said in the statement. We “fully expect that the equity used to fund this investment will be replenished with the sale of certain non-core assets over time.”

Liberty Global is financing the deal through approximately £225 million ($273 million) in equity funding, it said. A representative for Vodafone declined to comment.

Vodafone shares rose 2.1% to 94 pence in London trading on Monday. Liberty Global fell 0.9% to $21.08 in New York.

Vodafone and Liberty are closely entwined historically across Europe’s telecoms industry. They share a 50-50 joint venture in the Netherlands called VodafoneZiggo, and in 2019 Liberty sold Vodafone its German and eastern European businesses for €18.4 billion ($19.7 billion). In the UK, Vodafone competes against Liberty’s half-owned cable and mobile business, Virgin Media O2.

Deutsche Bank analyst Robert Grindle referenced a popular description of John Malone as a “swamp alligator” in the telecom and media sectors.

“You don’t see him coming, and then he just surfaces — and off you go,” Grindle said. “There is a wider consensus of hidden value to be released out of Vodafone,” he added, referring to the increasing number of strategic shareholders. Bloomberg