Vodafone is said to be lining up a 'white knight' to back its rumoured bid for Germany's largest cable operator Kabel Deutschland.
The telecommunications company is expected to present an offer as early as this week after Kabel revealed on Wednesday it doubled its net profits to €200m for the nine-months to December 31st.
Vodafone is working to boost its business after reporting a worse than expected 1.8% decline in group revenues of £11.38bn for the last three months of 2012, blaming difficult market conditions in Europe.
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A deal with Kabel could help revive the struggling business, according to analyst Ishaq Siddiqi who said he was not surprised to hear the latest reports Vodafone was lining up a white knight in a potentially "hostile bid".
"It could get to a point where we see governments get involved," he told Sharecast.
Vodafone would need clearance from competition regulators who have blocked cable mergers over concerns about higher prices for consumers.
In market chatter Tuesday, Vodafone was understood to have hired Goldman Sachs to advise on options while Kabel retained Morgan Stanley and advisory firm Perella Weinberg to defend its interests in the event of an approach.
Siddiqi said an agreement will depend on how much money Vodafone was willing to put behind its offer for Kabel, which raised its dividend by 67% to €2.50.
"Kabel is in a pretty good position for premium offer," he said.
Shares in Kabel fell 1.57% to €66.93 at 11:04 while Vodafone dropped 1.42% to 160.20p.
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