Key investor snubs Vodafone's $1.7 bln CWW bid

LONDON Mon Apr 23, 2012 9:58pm IST

A traffic sign is seen next to the Vodafone logo in Prague February 7, 2012. REUTERS/David W Cerny/Files

A traffic sign is seen next to the Vodafone logo in Prague February 7, 2012.

Credit: Reuters/David W Cerny/Files

Related Topics

Stocks

   

LONDON (Reuters) - British mobile operator Vodafone's (VOD.L) deal to buy Cable & Wireless Worldwide CWP.L for an agreed 1.04 billion pounds hit a hurdle on Monday when CWW's top shareholder declined to back a bid it considered too low.

The world's biggest mobile phone operator by revenue wants CWW for its fixed-line network, which could be used to relieve the strain on Vodafone's wireless operations from data-hungry smartphone users.

The 38 pence-a-share deal would also make Vodafone a leading player in fixed-line and mobile telecom services to Britain's businesses, and it could make cost savings by using CWW's networks, both in the UK and internationally.

"There is a good overlap between Cable & Wireless' fibre network and our base stations, which will significantly reduce the cost to us of managing the growth in data traffic," Vodafone Chief Executive Vittorio Colao told reporters.

Investment firm Orbis, which owns 19 percent of CWW, however, said the offer did not reflect the value of the British corporate telecoms specialist nor the benefit to Vodafone.

"We have declined to give an irrevocable undertaking or letter of intent to support the transaction," a spokesman said.

He would not say what price Orbis was looking for, but hedge funds have told Reuters the investor wanted 40-45 pence.

Vodafone needs support from shareholders owning 75 percent of CWW to proceed with the deal in its current form. It has secured acceptances from 18.6 percent.

Vodafone's offer is a 92 percent premium to CWW's share price before it declared its interest in February.

CWW's stock has been ravaged by three profit warnings and a suspension of dividends, and the price agreed is a fraction of the 98.5 pence it reached in March 2010 when splitting from Cable & Wireless Communications (CWC.L).

It has blamed a faster-than-expected drop in voice revenue, intense competition in data services, and government cutbacks for its woes, which have cost two chief executives their jobs.

Shares in CWW were 13.5 percent higher at 36.3 pence by 1518 GMT, reflecting shareholders' relief that a bid had materialised after Vodafone was granted three extensions by the UK's Takeover Panel. Vodafone's shares were flat.

"(The deal) is positive for Cable & Wireless because there was still some scepticism in the market Vodafone would bid," said Espirito Santo analyst Nick Brown.

Colao said the deal would make Vodafone the second-largest telecoms supplier in the UK after BT (BT.L), and would double the size of its business serving corporates and government.

Vodafone can use CWW's 20,500 kilometres of fibre cables to shift data from its wireless network, which is under strain as more and more people use data-hungry smartphones.

The mobile giant rents fixed lines for such capacity -- a process called backhaul -- from the likes of BT.

UBS is acting as sole financial adviser to Vodafone. Barclays and Rothschild are acting as joint financial advisers to CWW.

(Editing by David Hulmes)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Economic Pulse

REUTERS SHOWCASE

Political Pulse

Political Pulse

100 days of Modi: Good for business, not so good for marginalised groups.  Full Article 

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Best Economy

Best Economy

Swiss economy most competitive once again; EU, U.S., Japan improve.  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage