The largest shareholder in Swiss full-service provider Sunrise, Germany’s freenet Group, has criticised the structure of the company’s planned CHF6.3 billion (USD6.3 billion) takeover of local rival UPC Switzerland and said it would not participate in the CHF4.1 billion rights issue that will finance the takeover. The Financial Times quotes freenet CFO Ingo Arnold as saying that the combination of UPC and Sunrise ‘makes a lot sense’ and is ‘supported by compelling industry logic’. The official was concerned, however, that UPC parent Liberty Global would not take on ‘a sufficient share of the risk’ under the transaction structure announced yesterday, arguing instead that a merger structure would ‘allow for better risk distribution’. In addition, Mr Arnold questioned the viability of the plan, noting that Sunrise would need shareholders representing more than 50% of its stock to approve the rights issue; freenet holds around a quarter of Sunrise’s shares. freenet did not comment on how it would vote on the plan, but confirmed that it was not ready to increase its investment in the firm.
As reported by TeleGeography’s CommsUpdate yesterday, Sunrise agreed to acquire UPC for an enterprise value of CHF6.3 billion. Under the terms of the transaction, Sunrise would take on CHF3.6 billion of UPC’s outstanding debt and would raise CHF4.1 billion via a rights issue to finance the remaining cash payment of CHF2.7 billion and repay a portion of its existing debt.