Liberty Global plc today announced that it has entered into a definitive agreement to sell its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone Group plc for a total enterprise value of approximately €19.0 billion ($22.7 billion) on U.S. GAAP basis, as compared to €18.4 billion ($22 billion) on an EU-IFRS basis.

These four businesses represented approximately 28% of Liberty Global’s consolidated 2017 operating cash flow (“OCF”), which does not include its 50% share of OCF from the VodafoneZiggo joint venture in the Netherlands.

The sale price represents a total enterprise value for all four businesses combined of 11.5 times 2017 adjusted Segment OCF, or approximately 24.0 times 2017 operating free cash flow (“OFCF”), with an implied adjusted Segment OCF multiple for Liberty Global’s German operation of 12.0 times.

The transaction will be notifiable to the European Commission for regulatory approval, which is expected to occur mid-2019.

After completion of the transaction, Liberty Global will continue to be Europe’s leading cable television and broadband provider, with consolidated operations in the United Kingdom, Ireland, Belgium, Switzerland, Poland and Slovakia. Together, these country operations reach 24 million homes, account for 26 million video, broadband and fixed-line telephony subscribers and 6 million mobile services. In addition, Liberty Global owns 50% of VodafoneZiggo, a joint venture in the Netherlands with 4 million customers subscribing to 10 million fixed-line and 5 million mobile services.

Mike Fries, Chief Executive Officer of Liberty Global, commented: “We have a rich history at Liberty Global of successfully developing and reshaping our business to drive innovation, advance customer services and create significant value for shareholders. This is one of those moments. The transaction appropriately values our core cable operations at a double digit OCF multiple and will deliver €10.6 billion ($12.7 billion) of estimated cash proceeds to Liberty Global. Plus, we will retain all cash generated from the four businesses through closing. In Germany alone, which we value at 12 times 2017 adjusted Segment OCF, we will have generated over six times our original investment, supported by exceptional operating performance over the last seven years during which we grew revenue 60% and OCF 82%.

“This is also an important and exciting transaction for our customers and employees. In each of these markets, the combination of Liberty Global and Vodafone’s businesses will transform the competitive landscape and bring a new level of convergence to customers. Now more than ever, Europe needs strong competition from scaled national challengers willing and able to invest in next-generation wireless, video and broadband services.

“Germany, for example, is dominated by one provider that controls over half the broadband market8. As a result, innovation and investment lag other countries in Europe, impacting customer service, next-generation product deployment and broadband speeds. Even together, Liberty Global and Vodafone, whose cable networks don’t compete or overlap, will be half the size of the incumbent operator. It’s time to alter market dynamics by unleashing greater investment and competition.”

Given the time between signing and closing, the use of proceeds from the sale will be determined in due course and are expected to provide significant additional flexibility to optimize growth and shareholder returns. Of note, Vodafone will be acquiring the German business inclusive of its debt. As currently structured, upon closing, a change of control will be triggered with respect to Unitymedia’s debt, and lenders and bondholders will have an option to put their debt to Vodafone.

Liberty Global has agreed to provide certain transitional services for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by Vodafone.

Beginning with our Q2 2018 reporting, we expect to treat the assets being sold to Vodafone, as well as our Austrian business that is being sold to Deutsche Telekom, as discontinued operations for accounting purposes.

LionTree and Goldman Sachs are acting as financial advisers to Liberty Global on the transaction.