Executives at Swiss full-service provider Sunrise are confident that they can win shareholder backing for a CHF4.1 billion (USD4.1 billion) rights issue to facilitate the takeover of rival operator UPC Switzerland, despite the provider’s largest shareholder – German telco freenet – saying that it would not participate in the rights issue. Sunrise CEO Olaf Swantee told Reuters that the CHF6.3 billion acquisition could still be completed, noting that he had met more than 100 investors to convince them of the deal’s merits and remains ‘convinced that we can win the shareholders over’.
The takeover agreement was announced in February and would see Sunrise take on around CHF3.6 billion of UPC’s outstanding debts, whilst a CHF4.1 billion rights issue would bankroll the remaining cash payment of CHF2.7 billion and repay a portion of Sunrise’s debts. freenet, which holds 24.52% of the company’s shares, immediately raised concerns over the structure of the deal, saying that UPC’s parent, Liberty Global, would not take on a sufficient share of the risk. As such, freenet said it would not be participating in the rights issue, but the telco did not say whether it would support the deal, which requires shareholders representing more than 50% of its stock to vote in its favour in order to proceed. In addition to freenet’s doubts, Reuters writes that the proposal sparked ‘a sell-off of Sunrise’s stock, which has since lost around 8% of its value.’
Commenting on the reaction, Sunrise CFO Andre Krause was quoted as saying: ‘We have been surprised by the demands by freenet for fundamental changes in the structure of the deal. All the details of the transaction have been discussed by the board over the last year and we have signed a contract.’ Mr Swantee added that the deal would not be renegotiated as all of the potential options had already been discussed. Sunrise’s shareholders will vote on the matter later this year, once the competition authority has completed its analysis of the deal.