Cable & Wireless Worldwide Plc (CW/) (UK:CW)’s largest shareholder refused to support Vodafone Group Plc (VOD)’s 1.04 billion pounds ($1.7 billion) offer, saying the bid doesn’t reflect the value of the U.K. fixed-line network operator.
“The proposed deal is clearly attractive for Vodafone shareholders,” Orbis Holdings Ltd., which owns a 19 percent stake, said today in a statement to Bloomberg. “However, we are concerned that the offer price does not appear to reflect the value inherent in CWW.”
Vodafone, the largest wireless operator, agreed to pay 38 pence a share in cash in an offer recommended by Cable & Wireless’s board. Investors holding 18.6 percent of Cable & Wireless shares have agreed to back the deal. Vodafone, which needs support from shareholders representing 75 percent, predicts that the deal will be completed in the third quarter.
“Be careful what you wish for, it seems to be a pretty high-risk strategy,” said Evan Miller, a London-based managing director at Gamco Investors Inc. (GBL), which owns less than 1 percent of Cable & Wireless, referring to the statement from Hamilton, Bermuda-based Orbis. “I don’t see that there’s going to be another Vodafone on the scene.”
Vodafone became the sole bidder for London-based Cable & Wireless after Tata Communications Ltd. (TCOM) last week failed to agree on a price and decided against making an offer. Newbury, England-based Vodafone is pursuing a European fixed-line acquisition for the first time since 2010, when it ended talks to buy Germany’s Kabel Deutschland Holding AG. (KD8)
Cable & Wireless surged as much 17 percent to 37.45 pence in London and traded at 36.50 pence. The stock has gained 85 percent since Vodafone publicly expressed interest on Feb. 13. Vodafone rose as much as 1 percent.
The British mobile-phone operator is paying 2.5 times reported earnings before interest, taxes, depreciation and amortization, including debt. That compares with an average of 3.5 times for similar deals in western Europe in the last three years. Based on estimates for the 12 months through March 2012, Vodafone is paying a multiple of 3 times Ebitda.
Vodafone will double its revenue from enterprise customers with the purchase, while also gaining the largest U.K. fiber system for businesses. The operator needs the system to relieve the strain of surging data traffic on its own mobile-phone network as customers increasingly adopt smartphones including Apple Inc. (AAPL)’s iPhone and devices running Google Inc. (GOOG)’s Android.