The largest shareholder in Swiss full-service provider Sunrise Communications has announced that it will vote against the company’s planned CHF4.1 billion (USD4.2 billion) rights issue, which forms part of its move to take over rival operator UPC Switzerland. German network-independent mobile services provider freenet, which holds a 24.56% stake in Sunrise, issued a statement last week outlining in more detail its concerns regarding the terms of the planned acquisition and confirming that it would vote against the move. In its statement freenet argued that the purchase price of CHF6.3 billion was too high ‘in particular in light of the cable industry being under severe pressure,’ and that the price should be lowered. freenet went on to say that the price also implies that potential synergies of CHF1.3 billion are ‘being paid away to [UPC owner] Liberty Global in advance’. As such, freenet argued that Liberty Global is taking on too little of the risk, but receiving much of the benefit and should instead become a shareholder of the combined entity and receive a lower portion of the potential synergies. Similarly, the all-cash nature of the transaction leaves all execution risks with Sunrise shareholders, freenet added.
The German also questioned the necessity of the takeover, arguing that Sunrise did not need to make any of the concessions that freenet says have created a deal that is unfavourable to Sunrise shareholders: ‘Sunrise has an excellent positioning and outstanding prospects standalone as evidenced by its consistent outperformance of its peers since the [initial public offering] IPO.’
Following the announcement, Sunrise published a statement acknowledging freenet’s opposition but rejecting the company’s claims. Sunrise said that it ‘remains convinced that the acquisition of UPC Switzerland creates a stronger and more valuable Sunrise’.