Vodafone Group (NASDAQ: VOD) Takes A Liberty And Cool Runnings At Walt Disney Co (NYSE: DIS)

in MARKET MOVING by

On Wednesday, Vodafone (the world’s second-largest mobile operator) dialed up a deal to acquire some of American giant Liberty Global’s European cable TV businesses for $22 billion.

What Does This Mean?
Liberty Global’s businesses in Germany, the Czech Republic, Romania, and Hungary are all on the line in a deal which has been ringing for some time (perhaps a trend among telecoms companies). And the call may yet be dropped, as a lengthy regulatory review process awaits.

Vodafone hopes that the deal will catapult it from also-ran status in Central European markets to that of a leading player. It’s a similar rationale to the recent agreement between T-Mobile US and Sprint.

Why Should Shareholders Care?
For you personally: Europeans should be picking up a good deal.
Instead of future infrastructure investments driving its thinking, Vodafone is likely focused on the deal allowing it to become a “quad-play” provider in prosperous Germany. Offering Jannik and Josefine TV, phone, internet and mobile services in one big Bündel should help Vodafone extract more euros from its customers, who should also get a good deal since all-in-one services are typically discounted.

For markets: What’s good for Vodafone may not be right for its German neighbor.
Vodafone’s stock rose by 1% on Wednesday (even though buyers’ shares usually fall on such news). Investors likely connected with the idea of Vodafone’s broader reach making it more competitive – with a full battery of synergies to boot. But the stock of German market leader Deutsche Telekom fell by 2% as the company’s CEO criticized the deal. His belief that the acquisition would result in a German cable TV monopoly (and thus be blocked by competition regulators) may have smacked of wishful thinking, given Deutsche T’s growing audience.

 


 

On Tuesday, the record-breaking Black Panther movie left Disney shareholders screaming “What are those?!” at the extra profits the company made in its first quarter.

What Does This Mean?
Disney’s quarterly sales grew by almost 10% and its profits by more than 20% compared to last year. The growth was unsurprisingly led by the Mouse’s film segment, with a little help from the small worlds of its theme parks, which may have benefited from a consumer shift towards buying experiences over stuff. It’s just as well something was there to paper over the cracks in Disney’s television business: more and more Americans are ending their fairytale romance with pay-TV in favor of on-demand subscription services from the likes of Amazon and Netflix.

Why Should I Care?
For markets, Black Panther is a Cinderella story. While media analysts cheered Disney’s better-than-expected results, its stock still fell by 2% on Wednesday. Despite the success of Black Panther and Avengers: Infinity War, it’s the company’s ongoing bid to buy most of 21st Century Fox that’s gripping investors as the clock strikes midnight. Disney’s $52 billion offer may yet be trumped by Comcast’s $60 billion, but the shareholders remain optimistic. If it fails, that will put a dent in Disney’s plans to beef up its new online streaming business with original content.

The Bigger Picture: Fox hunting for sport.
On Wednesday, 21st Century Fox announced a deal to acquire seven local American TV channels from Sinclair Broadcast Group for around $1 billion – the latter is selling to win regulatory approval for its $4 billion purchase of Tribune Media Group. From Fox’s perspective, the channels are in cities where American football’s NFL is significant. They’d, therefore, go nicely with its existing regional sports networks, and help give some coherence to the “whole new world” it offers its potential suitors.

 

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Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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