John Malone's Liberty Global Inc. has made a controversial US$2.5 billion bid to buy the shares of Belgian cable operator Telenet it does not already own.

Liberty Global may end up with a battle on its hands, because its formal offer, at €35 ($46.15) per share, undercuts the €37 ($48.79) to €42 ($55.39) per share valuation recently set by Telenet and its advisors.

Liberty Global said it had "serious reservations" about financial projections made by Telenet management in October that were used to help establish the higher valuation range. More specifically, Liberty Global questioned a forecast that would require Telenet to boost its mobile market share from 1 percent in 2012 to 16 percent in 2018, noting that the plan is "heavily reliant on growth in outer years and assumes minimal competitive response."

Liberty Global announced an informal offer for the Telenet shares in September. On Tuesday, Liberty Global said its current and unchanged offer is "highly attractive" to Telenet shareholders because it represents a 12.5 percent premium to the Sept. 19 Telenet closing price of €31.10 ($US41.01) per share, and a 4.9 percent premium over Telenet's all-time-high trading price prior to the announcement of the original offer. (See Liberty Global Bids for Telenet Total Ownership.)

Liberty also argued that its offer marks a 15.2 percent premium versus Telenet's "peer group" of large European MSOs, which, in addition to itself, includes Ziggo B.V., Kabel Deutschland GmbH and Virgin Media Inc..

Liberty Global has a 50.4 percent stake in Telenet. Minority shareholders have until Jan. 11, 2013 to tender their shares and accept Liberty's offer.

Why this matters
A successful bid for Telenet would give John Malone a firmer grip on his already sizable European cable empire, built through a series of swaps and acquisitions.

But Liberty Global may be in for a slog. Telenet's independent directors said Tuesday that they would consider recommending an offer if it was in the range of €39 ($US51.43) to €40 (US$52.75) per share, reportsThe Wall Street Journal, meaning John Malone might have to pursue a hostile bid if he remains unwilling to budge.

For more

• Liberty Wraps Up OneLink Purchase
• Liberty Global Bids for Telenet Total Ownership
• Liberty Closes Kabel BW Buy
• Liberty Global Scoops Up KBW for $4.5B

— Jeff Baumgartner, Site Editor, Light Reading Cable