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It appears that Vodafone (LSE:VOD) will win the Cable & Wireless Worldwide (LSE:CW.) trophy as Orbis Investment Management is no longer blocking the goal. CWW share price rose about 8% today to 37.80, an increase of 2.77 pence.
Background
In February 2012 CWW announced to shareholders that Vodafone was in the early stages making a takeover bid for the company. The proposed offer at 38.00 pence per share represented a 98% premium on the share price of 19.80 as of 10 February and a 107% premium on the average price per share of 18.40 for the three months prior. As of 21 May 2012 CWW had secured irrevocable undertakings from 18.5% of its shareholders to approve the deal. However, Orbis, a Canadian investment firm and 19.5% stakeholder, not only declined to do the same, it declared that it would oppose the takeover, citing the offer as undervaluing CWW. Their perspective was that the offer was 2% less that the average price per share over the previous twelve months. The rub is that the approval of 75% of the shareholders is necessary to approve the deal. With Orbis guarding, there was no way that Vodafone could get the ball into the net.
Fast Forward to Today
CWW announced this morning that Orbis has stepped aside, leaving Vodafone with little to do but kick the ball into the goal. CWW indicated that it had now secured some 59% shareholder approval, and Orbis conceded that it was not in anyone’s best interest to prevent the scheme of arrangement. Orbis will vote in favour of the scheme by proxy at the shareholder meeting today. It became difficult for Orbis to maintain its position as the share price of CWW has not reached 38.00 pence since 20 March. In fact, following two years in which the company had lost 58% of its value, CWW announced in May that it’s EBITDA has declined another 15%.
In a statement released this morning, Orbis disclosed:
“Following discussions with CWW, we now believe that the CWW scheme of arrangement will eventually succeed, even if Orbis were to vote against it today. In these circumstances, our opposition would only serve to prolong the process because the company would likely adjourn today’s meetings to secure the necessary votes. This is not in the interests of any CWW stakeholder. Accordingly, Orbis intends to vote in favour of the scheme at the meetings today.”
What It All Means
The £1.04 billion investment in Cable & Wireless will transform Vodafone into the second largest domestic telecommunications provider in the UK, behind only BT. The acquisition places CWW’s 20,500 km or fibre-optic lines into Vodafone’s inventory, meaning that Vodafone will no longer have to rent capacity from BT as it has been. The addition of CWW’s infrastructure, products and services positions Vodafone to aggressively compete for the commercial sector telecommunication and data hosting business alongside BT and Virgin Media.
Initially CWW, the company that laid the first submarine telecommunications cable across the Atlantic, will continue to operate under its current banner until a disciplined transition brings it entirely under the Vodafone flag.
Company Spotlight
Cable & Wireless Worldwide is one of the two newly created companies established from the demerger of the original Cable & Wireless, with Cable & Wireless Communications also created as a separate business entity. CWW held ownership of the international cabling system of C&W and its global operations and has premium listing on the main board of the London Stock Exchange.
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