Vodafone Group Plc agreed to acquire Cable & Wireless Worldwide Plc for 1.04 billion pounds (1.7 billion dollars) in cash, adding a UK fixed-line network to its mobile-phone system and gaining business customers.
The world's largest wireless operator will pay 38 pence a share in an offer recommended by Cable & Wireless directors, the companies said in a statement on Tuesday. The stock surged 16% to 37.2 pence in early trading in London, for a gain of 88% since Vodafone publicly expressed interest Feb. 13.
Vodafone became the sole bidder for London-based Cable & Wireless after Tata Communications Ltd. last week failed to agree on a price and decided against making an offer. Newbury, England-based Vodafone is pursuing a European fixed-line acquisition for the first time since 2010, when it ended talks to buy Germany's Kabel Deutschland Holding AG.
Cable & Wireless, tracing its roots to 1866 when the first submarine cable across the Atlantic Ocean was laid, has holdings in more than 60 global cable systems. It also owns the largest UK fibre system for businesses, which Vodafone may use to relieve the strain of surging data traffic on its own mobile-phone network.
The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations, Vodafone Chief Executive Officer Vittorio Colao said in the statement.
Vodafone said Cable & Wireless investors representing 18.6% of the shares have already agreed to the purchase. The largest shareholder, Orbis Holdings Ltd., apparently is not convinced.
“The proposed deal is clearly attractive for Vodafone shareholders” Orbis Holdings Ltd., which owns a 19% stake, said on Tuesday in a statement. “However, we are concerned that the offer price does not appear to reflect the value inherent in C&W.”
By gaining its own fibre network, Vodafone will avoid paying fees to access those of rivals including BT Group Plc, to whom it pays 200 million pounds a year, according to Sanford C. Bernstein analysts. Vodafone will also gain British customers including Tesco Plc.
Separated from its parent company in March 2010, Cable & Wireless was once worth 2.4 billion pounds. The stock has lost 65% of its value in the past two years. In November, the company suspended future dividend payments as sales fell in its traditional voice network.
Gavin Darby, a former Vodafone executive who replaced John Pluthero as Cable & Wireless's CEO in November, said Feb. 16 that he would be prepared to consider significant, strategic decisions as part of plans to restructure the business. Vodafone said it will cut headcount at the company.