UK mobile operator Vodafone is in early stages of considering whether to make a cash offer for enterprise-facing telco Cable & Wireless Worldwide (CWW).
The company said in a stock exchange filing on 13 February that there is no certainty over…
UK mobile operator Vodafone is in early stages of considering whether to make a cash offer for enterprise-facing telco Cable & Wireless Worldwide (CWW).
The company said in a stock exchange filing on 13 February that there is no certainty over whether or how an offer will be made. However, it will announce a decision by 12 March, in accordance with takeover regulations.
Vodafone’s announcement followed local reports over the weekend that suggested it was considering a £700m bid for CWW, which after a series of profit warnings has seen the value of its shares plummet by around three-quarters over the last 18 months.
CWW provides voice, data and IP-based services to companies and governments around the world, and it has routinely been the subject of takeover speculation since it demerged from Cable & Wireless in 2009. As well as revenues being weighed down by a general decline in government spending, the group has also reportedly faced managerial disputes. Current CEO Gavin Darby, notably a former Vodafone executive, is CWW’s third CEO since June.
In addition to Vodafone, speculation in the past over possible suitors has also pointed to British mobile operator O2, as well as AT&T and Verizon from the US. Reports have also put private equity firm Apax Partners in the frame.
Analysts at Bernstein Research estimated on 13 February that a likely acquisition price would be £700m-£900m, noting that the reported £700m figure would represent a premium of around 30% to CWW’s current share price, and an EV/EBITDA of around 3.7x, which has a market cap of around £550m.
“Whilst it is possible to argue that there is some logic to bidding for these assets, which could be margin accretive, we think that it is by no means certain, nor necessary, for the UK business to do so,” said the firm in an investors note.
CWW posted £2.26bn in revenue for the full-year to the end of March 2011, down from £2.27bn for the corresponding period in 2010. FY 2011 EBITDA improved to £442m, from £431m in 2010.
