This week, European operator Liberty Global paid more than $1 billion to acquire a minority stake in rival Vodafone. Analysts noted the transaction could pave the way for a number of other potential strategic moves, despite the company’s insistence that it wasn’t a prelude to an acquisition play.
According to a press release from Liberty Global, it purchased 1.3 million shares of Vodafone stock in total, giving it a 4.92% stake in the business. It also stated that it had no intention of making an offer to buy Vodafone outright and would not seek board representation.
The relocation cost Liberty Global about £1.2 billion (or $1.46 billion), the majority of which was financed by debt and the remainder coming in the form of £225 million in equity funding.
Vodafone’s current share price, in the opinion of the operator, “does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities,” according to Mike Fries, CEO of Liberty Global. He added that the sale of unidentified non-core assets would be used to recover the equity funding Liberty Global used for the transaction.
Vodafone has operations in 21 nations and owns companies in Europe, Africa, and Asia. While Liberty Global has operations in Belgium, Ireland, Slovakia, Switzerland, the United Kingdom, and the Netherlands, its primary region of focus is Europe. Its main operation in the United Kingdom (Virgin Media O2) is a 50-50 joint venture with Telefonica established in 2021, and its subsidiary in the Netherlands (VodafoneZiggo) is a joint venture with Vodafone established in 2016. Liberty Global additionally revealed a second U.K. JV with Telefonica last year.
The share purchase, according to analysts at New Street Research, was somewhat unexpected but should enable Liberty Global to realize a respectable capital gain over time.
However, they added that there are some potential bigger plays that could result from closer ties between the two, even though it currently appears to be an “opportunistic move with limited strategic implications.” They suggested a number of options, including the potential sale of VodafoneZiggo to Liberty Global or a combination of the Irish assets of the operators. Additionally, they claimed that the action might “put pressure on Vodafone to join Virgin Media O2 as a wholesale partner.
“We wouldn’t believe any of these are linked to this investment, but there are certainly still areas where Vodafone and Liberty could do business together, and if Liberty Global’s stake in Vodafone were to increase further and they do push for a Board seat in future, then these options could become more relevant in future,” the analysts concluded.