PE players behind C&W break-up plan

Apax, Permira and WestLB are among a number of groups looking to back a possible break-up of UK telecoms group Cable & Wireless.

A number of European private equity groups are preparing to back UK telecoms company Thus in a possible plan to take former FTSE stalwart Cable & Wireless private prior to breaking the company up.

 

A weekend report in UK newspaper The Observer cites City sources who claim that Scottish telecoms company Thus is preparing an “outline project” that would see it take over Cable & Wireless’ former Mercury telephone network in the UK. At the same time financial investors Apax Partners, Permira and German bank WestLB, potential backers of Thus, would take over C&W’s Caribbean operations.

 

The offer, which would be worth £1.5bn, equates to around 68 pence per share, a near 50 per cent premium to the current share price of 45 pence per share. The share price is almost 90 per cent down on the 340 pence price at the beginning of the year and way below the 1400 pence price in 2000. Telecoms analysts estimate that the minimum value for a successful offer would be in the region of 80 and 100 pence.

 

Cable & Wireless has become a possible takeover target following a series of heavy losses. The company reported a net loss of £4.54bn for the six months to September 30, compared with a loss of £567m a year earlier. Reports have also circulated that the company plans to reduce its workforce by as much as 65 per cent.

 

Shareholders have criticised the company for poor management of the company’s cash pile. A recently announced restructuring programme is set to further reduce C&W’s cash pile by around £800m from its current level of £2.2bn.

 

Shareholders are considering legal action following the disclosure by the group a week ago of a potential £1.5bn tax liability linked to the sale of a half share in One2One, the mobile phone network.

 

Apax Partners has long been interested in the UK telecoms market and earlier this year appointed Mike Grabiner, former chief executive of Energis, as director with a specific remit to focus on telecoms opportunities.