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Tata Communications Mulls Bid For C&W Worldwide

3/1/2012 8:36 AM ET

India-based Tata Communications Ltd. (TCL: Quote) said Thursday that it is evaluating a possible cash offer for UK-based telecom company Cable & Wireless Worldwide plc (CW.L).

The move could put the company in a possible bidding war with Vodafone Group plc (VOD: Quote,VOD.L) for the acquisition of C&W Worldwide. Shares of C&W Worldwide are gaining more than 15 percent in the regular trading on the London stock exchange following the news.

TCL said that the possible bid for C&W Worldwide, which has a market capitalization of about $1.3 billion, is part of its ongoing review of potential acquisition opportunities. The company added that considerations are at a very preliminary stage.

TCL, part of the salt-to-software conglomerate Tata Group, said it will have to decide on an offer for C&W Worldwide by March 29. Standard Chartered plc (STAN.L) is acting as financial adviser to TCL on a possible bid.

Vodafone confirmed in mid-February that it is in very early stages of evaluating the merits of a potential offer for C&W Worldwide. The company has until March 12 to announce whether it will make a formal bid.

The Sunday Times of London had earlier reported, without naming any sources, that the Vodafone is mulling a 700 million pounds bid for C&W Worldwide, which once rivaled biggies like BT.

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 de-merged from Cable and Wireless plc in March 2010, and was spun-off as a separate listed public company on the London Stock Exchange. Its operations span the UK, Continental Europe, Asia Pacific, India, Middle East & Africa, and North America.

The company's global enterprise unit, which caters to firms based outside Britain, was one among its better-performing arms. The company's UK business has been suffering from the government's austerity measures.

However, C&W Worldwide has not been in the best of times, with a string of profit warnings since the de-merger. It's market value has declined more than 70 percent over the last two years, making it an attractive acquisition target.

In November, the company reported a loss for the first half and said it intends to suspend future dividend payments.

On the other hand, NYSE-listed TCL was earlier an Indian government entity, formerly known as VSNL. The company was later acquired by the Tata Group as part of the Indian government's divestment program. However, the government still owns 26 percent of TCL.

The acquisition of C&W Worldwide will provide TCL with a larger footprint in voice and data carrier business as well as in the undersea cable network.

The Tata Group is the largest Indian investor in the UK, following its acquisitions of Corus Steel, Jaguar Land Rover and Tetley.

On the LSE, CW.L is trading at $32.22, up $4.34 or 15.55 percent on a volume of 37.32 million shares.

TCL closed Thursday's trading on the Bombay stock exchange at 235.60 rupees, up 2.85 rupees or 1.22 percent on a volume of 155,455 shares.

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by RTT Staff Writer

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