Vodafone has agreed to acquire Liberty Global assets across Europe in order to expand mobile, cable, and broadband offerings across the region.
In a statement on Wednesday, the telecoms giant said it would purchase Liberty Global's operations in Germany (Unitymedia), the Czech Republic, Hungary, and Romania.
The deal, worth €18.4 billion ($21.8 billion), is intended to "accelerate Vodafone's converged communications strategy through in-market consolidation in Vodafone's largest market, Germany, and in Vodafone's Central and Eastern European ("CEE") markets."
The acquisition price of Liberty Global's asset includes the assumption of €7.6 billion in existing Liberty Global debt.
It is possible that the acquisition of Liberty Global's operations in these countries will allow Vodafone to compete against dominant, local telecommunications firms, such as Deutsche Telekom.
Under the terms of the deal, Vodafone will gain access to roughly 54 million homes with cable and fiber subscriptions and will reach a total of 110 million residencies including homes, businesses, and wholesalers.
Vodafone says that the new "national challenger" will raise its head in Germany and will "establish a strong second national provider of digital infrastructure in the German market, building on Vodafone's long track record in bringing sustainable and effective choice and competition to the German consumer and enterprise markets."
The company added that a second telecoms giant becoming present in the country will assist the German government's plans to bring Gigabit connection speeds to 25 million households by 2022.
In the Czech Republic, Hungary and Romania, Vodafone says the combined business will reach close to 40 percent of households, 15.8 million mobile, 1.8 million broadband, and 2.1 million television customers.
"[The deal] represents a step change in Europe's transition to a Gigabit Society and a transformative combination for Vodafone that will generate significant value for shareholders," said Vodafone Group Chief Executive Vittorio Colao. "We are committed to accelerating and deepening investment in next-generation mobile and fixed networks, building on Vodafone's track record of ensuring that customers benefit from the choice of a strong and sustainable challenger to dominant incumbent operators."
Vodafone intends to fund the deal through existing cash reserves, new debt, and roughly €3 billion in convertible bonds. In order to avoid reducing equity, under the terms of the bonds, the company will be able to repurchase the shares at maturity.
Combining the operations of both companies is expected to result in cost savings of approximately €535 million per year before integration costs by the fifth year of the completed buyout.
The acquisition is subject to regulatory approval, which may become a drawn-out affair due to potential pushbacks by local rivals which may argue over the combined businesses' strength and reach. However, Vodafone and Liberty Global aim to complete the deal by the middle of 2019.
A breakup fee of €250 million, payable by Vodafone, has been agreed should the purchase fail.