CWW shareholders urged to accept Vodafone offer amid falling results

22 May 2012

The board of UK fixed line network operator Cable & Wireless Worldwide (CWW) has encouraged shareholders to accept the GBP1.044 billion (USD1.65 billion) offer from Vodafone Group, after reporting earnings before interest, tax, depreciation and amortisation (EBITDA) of GBP378 million for the fiscal year ended 31 March 2012, down 14% compared to GBP442 million in 2010/2011. Revenue for the twelve-month period fell from GBP2.257 billion to GBP2.149 billion, predominantly due to a GBP121 million year-on-year drop in traditional voice revenue to GBP874 million, partially offset by growth in hosting, IP and data. The UK-based company booked exceptional charges totalling GBP606 million, including a goodwill impairment of GBP436 million and a deferred tax asset write down (GBP146 million). CWW said it generated a loss attributable to owners of the parent of GBP543 million in the year ended 31 March 2012, compared to a profit of GBP208 million the previous year.

Last month the CWW board recommended a GBP0.38 per share cash offer for the company from Vodafone Group, which could use CWW’s fibre network to bolster bandwidth for customers’ increasing demand for data services on its mobile network. Reuters reports that Vodafone needs to obtain acceptances from shareholders holding 75% for its scheme of arrangement to succeed; if it does not get the required majority, it could switch to a tender offer. The firm has support from holders of 18.6% of the stock, but CWW’s largest shareholder Orbis, which owns a 19% stake, has snubbed the bid, saying it believes the offer undervalues the company. It has, however, said that it would be comfortable being a shareholder in a Vodafone-controlled group. A spokesman for Orbis said the fund manager would consider the results and scheme document in detail, but reiterated it did not believe Vodafone’s offer reflected the ‘inherent value in the company.’

United Kingdom, Cable & Wireless Worldwide, Vodafone Group