Swiss full-service provider Sunrise has ‘significantly reduced’ its planned rights issue which forms a major part of its acquisition of cableco UPC Switzerland as the company looks to appease shareholders that were unhappy with the original structure of the takeover deal. In a press release from the company, Sunrise notes that it cut the rights issue to CHF2.8 billion (USD2.81 billion) from its original level of CHF4.1 billion. Under the new plan, the funds would be used to bankroll a cash payment of around CHF2.7 billion to UPC parent Liberty Global plus a portion of the estimated transaction costs of around CHF200 million. In addition, the company would ‘as soon as reasonably practicable’ on or after the completion of the transaction ‘fully redeem its CHF200 million 1.5% senior secured notes due 2024 with the net proceeds received from an upsizing of its CHF1.4 billion existing term loan facility by CHF300 million’.
As previously reported by TeleGeography’s CommsUpdate, Sunrise and Liberty agreed the terms of the sale in February 2019, under which Sunrise would pay CHF2.7 billion and take on CHF3.6 billion of the cableco’s debt burden. Sunrise had initially planned to raise around CHF4.1 billion through a rights issue to cover the cost of the cash payment to Liberty and allow the telco to clear a portion of its debts. Sunrise’s largest shareholder, German telco freenet, criticised the structure of the deal on the basis that it placed all of the risk for the transaction with Sunrise and ceded too much of the potential value of the merger to UPC’s parent. Pledging to vote against the scheme, freenet has since been engaged in a public clash with the telco’s management and the German company’s representatives were suspended from Sunrise board meetings in August.
In an effort to prevent a potential freenet-led shareholder mutiny at the upcoming extraordinary general meeting (EGM) to vote on the matter – now scheduled for 23 October – Sunrise has now amended its financing plans for the takeover and highlighted the potential payout for its investors and shareholders. In an investor presentation on the new programme, Sunrise noted that returns from acquisition are due to exceed the weighted average cost of capital of UPC within three years. Sweetening the deal for shareholders, Sunrise also unveiled plans for an increased dividend in the range of CHF350 million to CHF370 million for 2019.