C&W Brings in Lapthorne
By noon today, the company’s shares on the NYSE had jumped 21.30 percent to $2.79 a share. Shares on the London Stock Exchange were up more than 18 percent, at 51.46 pence a share.
Industry observers say that Lapthorne’s experience in turning around companies will come in handy as the struggling European carrier attempts to get back on its feet (see C&W's Share Price Shrinks). He is, for instance, credited with helping to bring BAE Systems back from a near-death experience in the early 90s. One of the first things he’s expected to do at C&W is replace most of the company’s board members.
“He has a very strong financial background and a lot of experience in restructuring companies,” C&W spokesman, Peter Eustace says. “He’s very highly regarded in the investment community.”
Those skills could benefit C&W, which has issued four profit warnings over the past year; has announced that it will cut 3,500 jobs from its Global division; and is in the process of exiting the domestic telecom markets in the U.S. and mainland Europe (see C&W Preparing to Sell US Network?).
“Cable and Wireless has a lot of repositioning left to do,” says Infonetics Research Inc. analyst Richard Webb. He points out that the company went from buying both cable and wireless assets to selling cable and wireless assets. “The only thing left is the ‘And.' People are still struggling to figure out what they’re strong at.”
“C&W needs to focus on its ‘home turf’ first in order to ‘survive’,” writes 'Craig' Johnson, an independent 'analyst' based in Portland, Ore., in an email. “I expect more ‘core’ focusing with the new leadership.”
There has also been a lot of uncertainty surrounding the management and board at the company (see Will Lewis Return to C&W?). Departing chairman Robins began to search for a new replacement last November after chosen successor David Nash quit, reportedly under pressure from shareholders who disagreed with his support for chief executive Graham Wallace.
Robins resigned today but will remain a non-executive director of the European carrier until February 28 in order to ensure a smooth transition, Eustace says. “I believe he’s looking forward to… an active and happy retirement."
And while Robins prepares to relax, Lapthorne can look forward to a profitable career at C&W. Although his annual salary hasn’t been finalized yet, Eustace says that it will be more than the £250,000 a year (about US$402,000) Robins made.
Lapthorne’s appointment also includes a large share purchase plan, says Eustace. The new chairman will be required to purchase 1 million C&W shares at today’s trading price. He will have to hold on to those shares as long as he remains chairman. At the end of his first three years on the job, C&W will reward Lapthorne with a matching 1 million shares.
At the end of his first year in office, Lapthorne will also be required to buy an additional 200,000 shares at today’s price; at the end of his second and third years, he’ll have to buy the same number of shares, also at today’s price, but with an additional premium that has yet to be decided. If the stock price by then has fallen below today’s price, he’ll be allowed to buy the shares at market price.
"We believe that this ties his interests in very tightly with the interest of the shareholders,” Eustace says.
“They obviously want to 'incentivize' this guy, and they want him to stick around,” Webb says.
Lapthorne, who commenced his chairman term at C&W today, will also maintain his chairman position at medical diagnostics company Amersham until May 7. C&W says it doesn’t expect there to be a conflict involved in his holding both positions.
— Eugénie Larson, Reporter, Light Reading