Vodafone takeover is the best option for troubled CWW
22 May 2012 | Kavit Majithia
Cable&Wireless Worldwide has said it was right to back Vodafone’s £1 billion takeover because of its drop in earnings and limited prospect of an upturn.
Vodafone’s offer, according to CWW, is a safer option to accept rather than implementing an internal turnaround plan in a highly competitive market.
Results released on Monday by the service provider shows core earnings fell by 14% to £378 million in the year ending in March, short of market expectations. Charges the company faced also totaled a further £6 million. Gavin Darby, chief executive at CWW believes Vodafone’s bid represents an “excellent opportunity”.
He said: “The board had to weigh up the transformative nature of the long-term plan and the potential upside it could deliver against the risks associated with the plan and the timescale required. The board believes the Vodafone offer represents an excellent opportunity for shareholders to realise an attractive valuation in cash today.”
Despite widespread backing, Orbis, CWW’s largest shareholder with 19%, has so far been reluctant to accept the takeover. It argues Vodafone’s offer does not represent “inherent value in the company”. CWW needs acceptance from shareholders holding a combined stake of 75% for the bid to be successful, and the company has given them until June 16 to proxy votes on the deal. If a majority is not achieved, Vodafone could switch to a tender offer.
Vodafone is looking to acquire CWW with the view of tapping into the company’s widespread enterprise partnerships and access the service provider’s extensive fibre cables for its data hungry customers.