XO makes play for C&W USA

19 Jan 2004

XO Communications, the telecoms and ISP group owned by Carl Icahn, has launched an audacious bid for Cable & Wireless USA, by attempting to thwart an existing deal with LA-based private equity group Gore Technologies Group (GTG). Just last month GTG agreed to pay USD125 million for C&W USA’s assets when the company filed for Chapter 11 bankruptcy protection. According to documents filed with the Delaware Bankruptcy Court, Reston-based XO is asking the court to disqualify GTG’s offer on the basis that the company ‘surreptitiously enticed’ an XO executive – namely Brian Oliver – to join their team. In its motion to the court XO claims Mr Oliver shared information regarding XO’s strategy and negotiations regarding a potential bid with GTG, thereby compromising XO’s ability to compete in the auction process. In answer to the allegations GTG issued a statement claiming that XO’s actions were nothing more than ‘a thinly veiled attempt to disrupt the bidding process.’ Moreover they maintain that prior to XO hiring Mr Oliver, Mr Oliver sought and was given the blessing of the XO management for his career change.

Carl Icahn has made something of a name for himself in the sale of bankrupt telecoms companies, having tried – albeit unsuccessfully – to trip up Singapore Telecoms Telemedia’s efforts to buy Global Crossing last year. He was, however, successful with the 2003 acquisition of XO itself, managing to gain control of the company by buying up most of its bonds after it had filed for bankruptcy.

The sale of C&W is subject to an open bidding procedure, and after requesting more information Qwest Communications International has been granted an extension until 5pm today to table a bid. If more than one is received, the bankruptcy court will conduct an auction at 10am Wednesday 21 January. Other companies which are speculated to be interested in bidding include Oak Hill Capital Management, Cerberus Capital Management, WilTel Communications and Level 3 Communications.

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