German Court Ruling Halts Merger of Kabel BW, Unitymedia

By Archibald Preuschat

The merger between cable network operator Kabel Baden-Wuerttemberg and Unitymedia, a unit of Liberty Global PLC (LBTYB), could be unwound after a German court Wednesday upheld anti-trust concerns from Netcologne and Deutsche Telekom AG (DTE.XE).

The court in Dusseldorf said conditions imposed on the deal by Germany's cartel office wouldn't prevent a market dominant position if Kabel BW and Unitymedia merged. While the companies are active regionally and don't compete at the moment, that would likely have changed without a merger over the next few years, the court ruled.

A Unitymedia spokeswoman said it would appeal the decision at federal court.

If the ruling is upheld on appeal, the cartel office will have to examine whether the merger can take place under altered conditions. If not, the companies will need to unwind the completed merger.

Liberty bought Kabel BW in 2011 for just under $4.5 billion and merged it with its Unitymedia unit in 2012. The deal was only approved by the German anti-trust authority after the companies agreed to an array of conditions. Among them, Unitymedia agreed to give up exclusive rights to contracts from large customers as well as ownership rights to networks within buildings.

At the time, the cartel office said the conditions strengthened the competitive situation for third parties, offsetting any disadvantages they would suffer from the merger.

Deutsche Telekom welcomed the ruling and said the conditions imposed by the cartel office wouldn't have supported a competitive market structure.

A Netcologne spokesman told Dow Jones a merger of the two wouldn't be appropriate under any conditions. The spokesman also said it would also closely scrutinize Vodafone Group PLC' s (VOD) plan to take over Kabel Deutschland Holding AG (KD8.XE).

Write to Archibald Preuschat at [e-mail]

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