Reliance Raises Flag
As shareholders prepared to meet in New York City today to decide whether to accept the Reliance offer, Flag received a letter offering $240 million for 100 percent of its common stock, subject to negotiation of "a contract" and "confirmatory due diligence." The new bidder was not identified publicly.
But although the offer, received last Thursday, January 8, trumped the prior Reliance bid of $211 million (see Reliance Raises FLAG Offer), the Flag board decided the letter "did not constitute an offer or proposal that could reasonably be expected to lead to a Superior Proposal," according to a filing with the Securities and Exchange Commission (SEC). The Flag board contacted the "third party" to reject the offer.
So who's the mystery suitor? Flag won't say, but Robert Schult, a senior analyst at TeleGeography, believes the offer came from Pivotal Telecom, which was formed by Pivotal Private Equity (part of the Pivotal Group) in June 2003 for the express purpose of buying Pacific Crossing Ltd. from Global Crossing Ltd. for $63 million.
Pacific Crossing Ltd. was a subsidiary of Global Crossing that operated the PC-1 subsea network, comprising two subsea cables and four landing points, that connects Japan and the U.S., so adding the Flag network to that asset would make sense for Pivotal.
Pivotal is not talking, though a spokesman initially commented, "Oh yeah, I heard about that," but later returned the more official-sounding response of "We can't make a statement on that just now, but we'll let you know when we can."
And why wouldn't Flag contemplate a higher offer? Apart from being so close to finalizing the Reliance deal, Schult at Telegeography notes that a tieup with Reliance would be "great" for both parties because of the amount of traffic the Indian operator will be able to put on the Flag network.
— Ray Le Maistre, International Editor, Boardwatch