India-based fixed-line telco Tata Communications has decided to make a cash offer for the UK fibre operator Cable & Wireless Worldwide (CWW), according to a media report.
Citing a person familiar with the development, Dow Jones said that Tata has…
India-based fixed-line telco Tata Communications has decided to make a cash offer for the UK fibre operator Cable & Wireless Worldwide (CWW), according to a media report.
Citing a person familiar with the development, Dow Jones said that Tata has decided to make a formal offer and is likely to raise short-term debt of US$2bn to finance the deal.
Tata Communications and CWW declined to comment.
Meanwhile, Reuters cited a source with direct knowledge of the situation saying that Tata has still not decided whether to make a bid.
Both Tata Communications, part of the Indian Tata Group, and Vodafone have formally expressed an interest in acquiring CWW.
The companies have until 29 March to decide whether they intend to make a cash offer for CWW.
Robin Bienenstock, an analyst at Bernstein Research, said she would be very surprised if there is a bidding war for CWW because the valuation makes it difficult to justify it.
When Vodafone’s interest in CWW was first reported in February, shareholders were rumoured to be holding out for a price of £1bn (US$1.6bn) or more.
For the six months up to 30 September 2011, CWW reported a profit of £34m (US$54m), down from £98m (US$155m) for the same period in 2010. EBITDA was £190m (US$300m), down from £203m (US$321m) in 2010.
David Molony, an analyst at Ovum, also said he did not think there would be a bidding war. He added that CWW would be an easier fit for Tata than for Vodafone, as they have similar networks, including business video, Ethernet, hosting and multi-protocol label switching (MPLS).
“I would expect Tata to be prepared to pay a bit more because they have an ambitious growth strategy and would kick themselves if they missed out,” he said.
