Merger Mania Continues in Europe

Fresh speculation about potential European telecom mergers and acquisitions emerged over the weekend, following quickly on from last week's gossip and rumors. (See Eurobites: Gossip Galore.)

This time, the main names in the frame are Cable and Wireless plc (NYSE: CWP), U.K. alternative carrier THUS plc (London: THUS), ntl group ltd. (Nasdaq: NTLI), and Irish national operator eir , while the takeover saga surrounding Danish incumbent TDC A/S (Copenhagen: TDC) isn't over yet.

Brit bid buzz
Cable & Wireless could be the target of a private equity-backed takeover bid before it reports its interim results on January 24, according to a report in British newspaper The Guardian, which cited Morgan Stanley research that identified the carrier as one of the most likely London Stock Exchange stocks to attract such a bid. As you'd expect there's no comment from the carrier, which saw its share price dip 0.5 of a penny to 128 pence this morning, giving it a market capitalization of nearly £3 billion (US$5.3 billion).

The carrier's stock moved up from 120 pence in trading last week after City of London gossip that Orange (NYSE: FTE) was considering a bid, though the French giant denies any such plan.

Thus, which is itself looking for acquisitions since it lost out to C&W in the battle to buy Energis, is also regarded as a potential target, with talk circulating in financial circles that Sky wants to add Thus to its telecom portfolio following its move for Easynet Ltd. (See Murdoch's Sky Takes on BT, THUS, C&W Clash Over Energis, and THUS: Still Shopping.)

The Easynet acquisition was recently approved by the U.K.'s Competition Commission, and Sky now owns 89.3 percent of Easynet stock. Analysts have been speculating about further telecom acquisitions since the Easynet offer was made, with many debating whether Sky would add to its broadband base with a move for another ISP.

But Thus, which runs a national network and specializes in Ethernet services, isn't in the consumer broadband market. However, it does offer DSL services to businesses through its Demon unit, and would give Sky a national backbone to which its high-speed access tails could hook up. (See THUS Speeds NorMAN Access and Demon Boosts Broadband Speeds.)

Thus is trading down 0.5 pence this morning at 15 pence, valuing it at £202 million ($357 million).

Meanwhile, Virgin Mobile Telecoms Ltd. investors are reportedly holding out for a 400 pence per share offer from cable operator suitor NTL, which had its first bid of 323 pence kicked back in its face. Virgin Mobile's share price is up 2.75 pence to 377.25 pence this morning.

Once an agreement on that deal is reached and NTL has completed its merger with fellow cable firm Telewest Global Inc. (Nasdaq: TWSTY), private equity firm Permira is reportedly planning a bid for the whole shebang, according to the Sunday Times. (See NTL Eyes Mobile Buy and NTL & Telewest: Together at Last!)

It's not the first time a leveraged buyout of an expanded NTL has been rumored: Just last month a group of private equity players, including Apax Partners and Providence Equity Partners , was reportedly lining up a bid of up to $14 billion. (See Eurobites: A Private Affair.)

Eircom attracts private interest
Ireland's national carrier Eircom, which had been involved in takeover talks with Swisscom AG (NYSE: SCM) last year until the Swiss government intervened, is now believed to be attracting interest from private equity groups. (See Swisscom Ends Eircom Talks.)

Eircom, which has been busy building its broadband and mobile customer bases, only returned to the stock market less than two years ago. It is believed to be an attractive target because of the relatively high margins it can generate from voice and data services in the face of limited competition. (See Alltel Completes Meteor Sale, Eircom Reports 2004 Prelims, NetCentrex Helps Eircom With VOIP, and Mixed Fortunes for Euro IPOs.)

Eircom's share price currently stands unchanged at €2.05, giving the operator a capitalization of nearly €2.2 billion ($2.66 billion).

TDC investors hold firm
Danish incumbent TDC A/S (Copenhagen: TDC) was forced to reiterate its support for the $12 billion offer from private-equity-backed bidder Nordic Telephone Company ApS (NTC) today when Danish pension fund ATP, which owns 5.6 percent of TDC stock, said it wouldn't accept NTC's offer. (See NTC Updates on TDC Offer, TDC Still Backs NTC Bid, and TDC Unveils $12B Offer.)

ATP, the Danish Labour Market Supplementary Pension Fund, reckons its stake is worth more if TD remains a listed company. So is NTC's offer of 382 Danish Kroner ($61.89) per share enough? Yes, reckons the analyst team at Lehman Brothers , which believes DKK340 ($55.07) would have been a fair price.

NTC needs the backing of 90 percent of TDC shareholders by January 12 for its bid to be successful, so if just another 4.4 percent of TDC shareholders agree with ATP then the takeover deal will be off.

— Ray Le Maistre, International News Editor, Light Reading

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