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CVC Has Until Monday to Up Bid for Kabel

Private equity firm CVC has until today to up its 2.9 billion euro ($4.1 billion) bid for German cable operator Kabel BW if it wants to beat Liberty Global‘s bid, Reuters reported. Liberty Global upped its bid to 3.1 billion euros ($4.4 billion) on Saturday, Reuters said.

(Reuters) – Private equity firm CVC has until Monday to raise its offer in a battle for German cable operator Kabel BW if it wants to beat Liberty Global’s bid, according to people familiar with the situation.

Media mogul John Mallone’s Liberty Global (LBTYA.O) edged ahead in the auction for Kabel Baden Wuerttemberg [KBWHL.UL], people familiar with the matter said, when it raised its bid to 3.1 billion euros ($4.4 billion) on Saturday.

CVC [CVC.UL], which had previously looked a likely winner with its 2.95 billion euro bid, has not yet raised its offer but can do so until Monday, two people said on Sunday.

A third offer from buyout firm Hellman & Friedman was beaten by both last week.

All of the parties concerned declined to comment.

Swedish buyout firm EQT (EQT.N), backed by the Wallenberg family, had been due to decide whether to sell KBW this weekend, but could now take a while longer given the higher offer, one of the sources said on Sunday.

Should it come to a tie, EQT is likely to pick CVC in light of significant anti-trust issues facing Liberty Global’s bid, which would bring together Germany’s second and third largest cable companies, a second person familiar with the matter said.

Liberty Global already owns larger German cable company Unitymedia.

EQT shelved plans last week to float Danish outsourcing firm ISS and had been looking at a possible stock market listing for KBW at the same time as exploring a sale, another source familiar with the situation said on Saturday.

The market turmoil in the aftermath of the catastrophic earthquake in Japan and fighting in Libya has rocked financial markets, taking potential IPOs off the table.

Germany’s cable market — considered ripe for consolidation for years — poses a big threat to dominant telecom firms because cable companies now also offer telephone and Internet, eating into telecoms business.

But consolidation has been constrained by regulation that effectively bans mergers among large players.

Kabel Deutschland (KD8Gn.DE), Germany’s biggest cable operator, in 2004 tried to merge with Kabel Baden-Wuerttemberg and Unitymedia to create a sizeable rival to telecom group Deutsche Telekom (DTEGn.DE).

Anti-trust authorities thwarted the plans and the Federal Cartel Office has repeatedly said that it believed a merger of the large cable companies was problematic.

Since regulatory approval can take months, the involved parties may choose to “warehouse” the deal, meaning banks would own Kabel BW for some time and also ask for a fee.

“This is very attractive for EQT since there is no execution risk anymore”, one of the people familiar with the negotiations said.

“This only works with an asset the banks consider very attractive,” the person said.

Financing for a takeover of KBW is expected to exceed six times earnings, other people said on Friday, with the package set to include loans and high-yield bonds.

A third person said on Saturday that debt for a Liberty Global offer would have to be placed in escrow until German regulators had approved a deal. ($1=.7053 Euro)