Vodafone Group plc (VOD: Quote,VOD.L) is nearing a deal to acquire UK-based telecom company Cable & Wireless Worldwide plc (CW.L) for more than $1 billion, according to media reports over the weekend.
Various reports pegged Vodafone's formal offer for C&W Worldwide at between 30 pence and 45 pence per share, and between 35 pence and 39 pence per share. C&W Worldwide, owner of the UK's largest fiber-optic network, has a market capitalization of about $1.3 billion.
The UK Takeover Panel last Thursday agreed for a third time to extend the deadline by which Vodafone must make an offer. Vodafone now has until noon in London on April 23, Monday, to make a firm offer or walk away from talks with C&W Worldwide.
Vodafone, which first made an official approach for C&W Worldwide in early February, emerged as the sole bidder after India-based telecommunications company Tata Communications Ltd. (TCL: Quote) abandoned its takeover efforts last week. TCL said last Thursday that it has been unable to reach an agreement with C&W Worldwide on an offer price.
TCL is part of the salt-to-software conglomerate Tata Group, the largest Indian investor in the U.K. following its acquisitions of Corus Steel, Jaguar Land Rover and Tetley.
C&W Worldwide specializes in providing communication networks and services, including managed voice, data and IP based services and applications to large corporates, governments, carrier customers and resellers.
The company's global enterprise unit, which caters to firms based outside Britain, was one among its better-performing arms. However, its U.K. business has been suffering from the government's austerity measures and a weak economy.
C&W Worldwide has been going through a tough time since its spinoff from parent Cable & Wireless in March 2010, making a series of profit warnings and suffering numerous management changes. The company's market value has declined more than 70 percent over the last two years, making it an attractive acquisition target.
In mid-November, C&W Worldwide reported a loss for the first half and said it intends to suspend future dividend payments.
Following a successful acquisition, Vodafone is reportedly expected to auction C&W Worldwide's 260,000 miles of undersea cables that connects around 150 countries.
The auction has the potential to fetch about 500 million pounds. Vodafone could also use some of C&W Worldwide's 5.2 billion pounds in capital losses to offset about 1 billion pounds on future tax bills.
Bidders for the undersea cable business could include Tata Communications, U.S. firms AT&T Inc. (T: Quote) and Verizon Communications Inc. (VZ: Quote), and Hong Kong's Pacnet.
VOD closed Friday's trading at $27.69, down $0.01 on a volume of 6.78 million shares.
On the London stock exchange, CW.L closed Friday's trading at 32 pence, down 2 pence or 5.88 percent on a volume of 27.21 million shares.
by RTT Staff Writer
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