John Malone's attempt to buy the remaining 50% of Telenet Group
Holding NV (TNET.BT, TLGHY) is running into increasing opposition
from Telenet's largest shareholders, complicating the American
billionaire's effort to consolidate control of the Belgian
cable-television operator.
Two of Telenet's top five outside investors say they won't
accept the EUR35 per share tender offer Mr. Malone's Liberty Global
Inc. (LBTYA, LBTYB) officially made last month, which expires
Friday. Omega Advisors Inc., which owns more than 3% of Telenet,
won't sell its shares at that price, an official at the firm said
in an interview this week. That follows a similar statement Dec. 19
from Norges Bank Investment Management, an arm of the Norwegian
central bank, which owns more than 4% of Telenet.
Liberty Global wants to increase its current stake of just over
50% in the fast-growing Belgian company in part so it can reap
synergies from managing Telenet in a more coordinated fashion with
its other European holdings. According to Belgian
corporate-governance rules, if it can boost its stake into the 70%
to 75% range, Liberty Global's ability to dictate moves at Telenet
like mergers and share buybacks would increase dramatically.
Liberty Global officials insist that they won't increase their
current offer. That, together with the opposition from Omega,
Norges and other big Telenet holders, increases the odds that the
U.S. company ends up achieving only a small increase in its
stake.
In a sign that Mr. Malone and Liberty Global Chief Executive
Michael Fries are resigned to the likelihood that they will get
fewer shares than originally hoped--and of how acrimonious the
attempted buyout has become--Liberty Global has said that
regardless of how many shares are tendered, it intends to take a
more active role managing the company.
Liberty Global also says it will push Telenet to increase its
borrowings and buy back its stock. That, in turn, could harm
minority Telenet shareholders that remain by decreasing liquidity
in the already thinly traded stock.
That has set up a high-stakes game of chicken between the
Englewood, CO-based company and its fellow Telenet investors.
Liberty Global management is meeting with Telenet investors this
week in the U.S. and Europe. Their efforts to convince shareholders
that they are serious about sticking to the offer appear to be
bearing at least some fruit: Telenet stock fell 1.2% Monday and now
trades at 35.10 euros, giving the company a EUR3.96 billion ($5.2
billion) market value.
A Telenet spokesman had no immediate comment. A Liberty Global
spokeswoman declined to comment.
Since it was launched in September, Liberty Global's effort to
consolidate its ownership of Telenet has been fraught with
controversy. In October, Telenet released an appraisal investment
bank Lazard Ltd. (LAZ) was commissioned to do, which valued the
company at between EUR37 and EUR42 a share. Liberty Global
responded by defending its offer.
Much of the valuation dispute centers around Telenet's wireless
operation. In late December, the company announced that it had
already signed up 500,000 subscribers, well ahead of schedule.
Investors and Telenet officials cite that to support their argument
that the company is worth more than Liberty Global is offering.
"We have communicated to the board that we will not tender any
shares at 35," said Jon Aborn, co-director of research at Omega,
which is run by well-known investor Leon Cooperman. "We think that,
at 35, the shares are attractively priced before any consideration
for the mobile business, tax attributes, or potential
synergies."
Liberty Global officials counter that Telenet's expectations for
mobile growth over the long term are unrealistic and that at any
rate the so-called resale customers the company is attracting are
less valuable that those served by a company's own network.
What's at stake for Liberty Global is more than just its
position in Belgium, where Telenet provides cable-TV, high-speed
Internet and telephone services, primarily to consumers in Flanders
and Brussels. Liberty Global is focused outside the U.S. and has
been acquisitive in Europe in recent years. Should it set its
sights on other operators in the region--which a person familiar
with the matter says is a possibility--its position could be
compromised if it blinks in negotiations with other Telenet
shareholders.
Write to Dana Cimilluca at Dana.Cimilluca@wsj.com
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