Independent advisory firm Institutional Shareholder Services (ISS) has recommended Cable & Wireless Worldwide (CWW) shareholders accept Vodafone’s offer to pay 38p per share – or a total £1.04bn (US$1.67bn) – to acquire the company.
ISS…
Independent advisory firm Institutional Shareholder Services (ISS) has recommended Cable & Wireless Worldwide (CWW) shareholders accept Vodafone’s offer to pay 38p per share – or a total £1.04bn (US$1.67bn) – to acquire the company.
ISS issued a report concluding that the UK mobile giant’s cash offer reflects fair compensation for the current value of the struggling fixed-line operator and an at least partially successful turnaround in the medium term.
“Based on reasonable sale process with two bidders, adequate valuation and the risk that investors face in going through a difficult turnaround, we recommend shareholders approve the Vodafone offer,” the report states.
However, ISS noted that shareholders are in a difficult position, forced to decide “whether to dig in for what promises to be a deep, multi-year turnaround effort, or to accept [the Vodafone offer] and leave the heavy lifting to someone else”.
CWW shareholders are set to meet on 18 June to vote on the proposed takeover, which requires the approval of investors holding at least 75% of the fixed-line operator’s stock to proceed.
ISS is seen as influential with smaller shareholders, who account for around 10% of CWW shares.
On 21 May, the CWW board reaffirmed its support for the takeover, saying it made better sense than attempting to revive the business in the current economic climate.
Three of the telco’s top four shareholders, holding a combined 18.6% stake, have previously indicated their support for the deal.
However, Orbis, CWW’s largest shareholder with a stake of about 19.1%, has said it does not believe the offer reflects the company’s true value.
In its report, ISS takes a different view, saying “Vodafone’s offer represents a 92% premium to an unaffected price whose long, inexorable slide reflects investors fleeing en masse from a disappointing investment”.
If Vodafone should fail to receive support by at least 75% of shareholders for its proposed scheme of arrangement, the company could instead launch a tender offer.
Vodafone first confirmed its interest in acquiring CWW in February, with India’s Tata Communications soon following suit. However, Tata withdrew from the bidding in April, saying it had been unable to reach an agreement with CWW on price.
In ISS’ view, the fact CWW attracted no other bids despite the public nature of the sales process and the lack of legal obstacles preventing others from coming forward suggests Vodafone’s offer is the best the company can expect at present.
In addition, Vodafone has formally stated its bid is final and will not be increased.
“Under UK rules, this comment is binding barring a counter bid – which, again, the process suggests is unlikely.”
