CWW’s key shareholder backs Vodafone’s $1.6 billion takeover

UK mobile giant Vodafone is close to clinching the takeover of Cable & Wireless Worldwide (CWW) after CWW's largest shareholder Orbis Investment Management dropped its opposition to the £1-billion ($1.6 billion) acquisition.

Institutional investor Orbis, which holds 19.1 per cent of CWW, had earlier opposed the deal saying that Vodafone's 38 pence-a-share offer did not reflect the "inherent value in the company".

Vodafone's offer was structured on all-or-nothing terms under a so-called scheme of arrangement proposal, where it needed the support of 75 per cent of CWW's voting shareholders.
 
Without a competing bid emerging and shareholders holding 58.8 per cent of CWW's  shares already backing the takeover, Orbis today dropped its opposition, which has paved the way for the deal to go through.
 
In a statement to the London Stock Exchange, Orbis said, ''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.''
 
Bermuda-based Orbis made the announcement just hours before a crucial CWW shareholder meeting for approving the deal. Although it faced tens of millions of pounds loss in the deal, Orbis finally relented after it realised that the deal would go through even if it had to vote against it.
 
Vodafone approached CWW in early February with a 38-pence-a-share offer, valuing the owner of the largest fibre-optic network in the UK at £1 billion.
 
Tata Communications (TCL), which was planning to place a counter offer, backed out in April after having failed to reach an agreement on an offer price with CWW. (See: Tata Communications backs out from bidding for UK's CWW) 
 
CWW, which generates about 12 per cent of its revenues from the UK public sector, has been facing hard times since its spinoff from parent Cable & Wireless Plc in 2010, having issued numerous profit warnings and several management changes.
 
CWW owns fixed lines that mobile operators use to provide links to mobile transmitters and switching offices, besides providing voice, data and hosting services. Its clients include major British companies such as Next, Tesco and United Utilities.
 
CWW owns the UK's biggest fibre network dedicated to businesses and also has a 260,000 mile international cable network that extends across Europe, India and throughout Asia. In conjunction with satellite, C&WW connects every continent and more than 150 countries.
 
About one-third of its £2.1-billion revenues come from carrying internet and voice traffic for other telecom companies.

Troubled CWW's market value has declined over 70 per cent in the past 24 months, broadly reflecting the woes of the global telecom sector, but making it one of the least expensive takeover target in the industry.
 
The acquisition would allow Vodafone to avoid paying carriage charges to rival providers such as BT for carrying its calls on landlines between masts. The acquisition would also give Vodafone access to CWW's corporate clients, including Tesco.
 
Vodafone would also get to use CWW's fibre cables to shift data from its wireless network, which is under strain as an increasing number of people switch to data-hungry smartphones. Currently, the mobile giant rents fixed lines for such capacity from the likes of CWW and BT.
 
The deal would also boost the enterprise business of Vodafone with the addition of contracts to provide voice, data and hosting services to British government departments and companies.