British telecommunications company Cable & Wireless Plc (CW.L) Tuesday said it expects to complete the demerger by March 31, 2010. On November 5, the company has announced its intention to separate into two businesses, Worldwide and CWI.Separately, Cable & Wireless announced the launch of an offering of about GBP 200 million of convertible bonds due 2014.
Providing more details on demerger, the company said existing Cable & Wireless shareholders shall receive one share in Worldwide and one share in CWI for every Cable & Wireless share that they hold at the completion of the demerger. Following the separation, the holding companies of both CWI and Worldwide will be separately listed on the main market of the London Stock Exchange.
The separation is subject to shareholder approval and is expected to be effected by way of a demerger of Worldwide from the existing Cable & Wireless Group, which will then comprise of the CWI business, the company noted.
As per the plan, CWI, Richard Lapthorne will be the Chairman of CWI, Tony Rice will be Chief Executive Officer, Tim Pennington will be Chief Financial Officer, and Nick Cooper will be the Corporate Services Director. At Worldwide, John Pluthero will be Chairman and Jim Marsh will be CEO. The company plans to appoint the CFO by January 2010.
As a part of the demerger plan, Cable & Wireless intends to put in place nearly GBP 1.1 billion of new and replacement cash and bank credit lines in order to meet GBP 500 million of financing for Worldwide, through a combination of new bank credit lines and convertible bonds, of which GBP 200 million is to replace existing facilities; and also to meet US$1 billion of financing for CWI, through new bank credit facilities which are intended to replace existing facilities and new bonds to be issued during 2010 to cover medium term debt maturities.
Post separation, the company stated that CWI will report in US dollars, as majority of its revenue and profit are earned in US dollars or related currencies, and Worldwide will continue to report its results in sterling.
Cable & Wireless added that both the businesses are anticipated to have sufficient cash and lines of credit to meet their financing and refinancing needs for the three years following the demerger and to support the execution of respective strategies.
Cable & Wireless intends to put in place around US$1 billion of new bonds and bank facilities for CWI to replace existing debt facilities and meet its medium term debt maturities; and GBP 500 million of cash and new facilities for Worldwide of which GBP 200 million is to replace existing debt facilities.
During the first half of the year, Cable & Wireless operated as two separate businesses: CWI and Worldwide. The CWI business operates integrated telecommunications companies offering mobile, broadband and domestic and international fixed line services to residential and business customers. It has four major operations: Caribbean, Panama, Macau and Monaco & Islands. The Worldwide business provides enterprise and carrier solutions to the users of telecoms services around the globe.
CWI revenues for the first half period increased to GBP 721 million or US$1.13 billion from GBP 649 million or US$1.2 billion in the previous year. Worldwide unit revenues grew to GBP 1.14 billion from GBP 1 billion in the first half of the prior year.
Further, the company also announced that it intends to recommend a final dividend of nearly 6.34 pence per share, resulting in a 2009/10 total dividend of about 9.50 pence per share.
In a separate press release, Cable and Wireless announced the launch of an offering of nearly GBP 200 million of convertible bonds due 2014. The net proceeds of the offering are intended to be used by Worldwide for general corporate purposes. Should the convertible bonds not transfer to Worldwide, the monies shall be retained by Cable & Wireless for general corporate purposes, stated Cable & Wireless.
The convertible bonds are expected to carry a coupon of between 6% and 6.75% per annum payable semi-annually in arrear and the conversion price is estimated to be set at a premium in the range of 28% to 33% to volume weighted average share price of Cable & Wireless between launch and pricing of the offering, adjusted downwards for the interim dividend of 3.16 pence per share, the ex-date of which is November 18, 2009.
The bonds will be issued at 100% of their principal amount and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the convertible bonds in 2014.
Cable & Wireless stated that the bonds will initially be its debt obligations and convertible into fully paid ordinary shares of Cable & Wireless.
Upon the successful completion of the company's intended demerger process, and subject to fulfillment of certain conditions related to opening balance sheet of Worldwide, it is intended that the convertible bonds will become debt obligations of Worldwide and convertible into fully paid ordinary shares of Worldwide unless previously redeemed or cancelled. In the event that the separation does not complete, or the conditions to transfer the bonds to Worldwide are not met, the bonds shall remain with Cable & Wireless.
The size of the offering may be increased by up to GBP 30 million by the company and joint bookrunners. Closing and settlement are expected on or about November 24, 2009, Cable & Wireless added.
CW is currently trading on the London Stock Exchange at 141.50 pence per share up 3.20 pence or 2.31% on a volume of 13.91 million shares. In the past 52-week period, the shares have been trading in a range of 125.10 pence to 170.00 pence.
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