C&W Offers £329M for THUS
Only 10 hours before its self-imposed make-or-break deadline, Cable and Wireless plc (NYSE: CWP) has struck an agreement to acquire fellow British operator THUS plc (London: THUS) for £329 million ($656 million) in cash, nine percent higher than its initial offer.
But while the new offer is good enough to avoid rejection, the THUS board doesn't regard it as "compelling," and has decided not to recommended the offer to shareholders.
In a statement to the London Stock Exchange , THUS noted that the new offer "represents a proposal worthy of consideration by shareholders in the absence of a better proposal. Accordingly the THUS Board... has agreed that the Offer be put forward to THUS Shareholders. However... the Offer is not such a compelling proposal that the THUS Board could give a recommendation to THUS Shareholders to accept the Offer at this time."
Today's news ends a month of watching and waiting for THUS and its shareholders. In late May, C&W offered 165 pence per share for the business services specialist (which has never reported a net profit), an offer that was rejected. (See C&W Eyes Ethernet Acquisition and C&W Details THUS Offer.)
C&W then set itself a deadline of close-of-business today to strike a deal or walk away, a move that generated interest in THUS from other operators. (See THUS M&A Update.)
Then shortly after 7am this morning the two operators announced an agreed price of 180 pence per share, which values the smaller carrier's stock at £329 million, and by mid-morning C&W announced that it already held nearly 30 percent of THUS stock.
If the takeover is successful, C&W will also assume THUS's net debt of £32 million ($64 million), taking the overall value of the deal to £361 million ($720 million).
The news sent THUS's stock soaring by 29.25 pence, just more than 20 percent, to 174.5 pence in early trading on the London exchange. C&W's stock edged up by 1 percent to 149 pence.
THUS offers business focus
THUS, which provides voice, data, and managed services to U.K. businesses and government departments, generated revenues of £576.2 million ($1.15 billion) in the 12 months to 31 March 2008. While its earnings before interest, tax, depreciation, and amortization were £57 million ($114 million), it reported a small net loss of £6.2 million ($12.4 million). (See THUS Wins Council Deal, THUS Lands Press Deal, THUS Fibers UK University, THUS Wins NGN Deal, and Global Radio Renews THUS Contract.)
C&W reported revenues of £3.15 billion ($6.3 billion) and a net profit of £252 million ($502 million) for the 12 months to March 31, 2008. (See C&W Reports Fiscal Year.)
Using its national MPLS-based network, THUS has been one of the U.K.'s pioneers in the Ethernet services sector, competing with the likes of BT Group plc (NYSE: BT; London: BTA), Colt Technology Services Group Ltd , Exponential-e Ltd. , Neos Networks , and Virgin Media Business Ltd. for enterprise accounts. (See THUS Unveils Interims, THUS Wins Ethernet Deal, THUS Reaches Milestone, and THUS Launches SME Ethernet Services.)
Adding THUS to its U.K. business would give C&W a stronger position in the growing Ethernet services market, and enable cost savings from headcount, network, and real estate efficiencies.
Once the acquisition of THUS has been completed (assuming it is successful), C&W is expected to split itself into two companies, one based on its Europe, Asia, and U.S. operations, and the other comprising its "International" operations (Central America, Macau, Monaco, and other small markets). (See C&W Soars on Sell-Off Speculation.)
— Ray Le Maistre, International News Editor, Light Reading