Vodafone Signs GBP1 Billion Takeover of Cable and Wireless Worldwide

Communications provider Vodafone (Europe) has reached a “fair and reasonable” agreement to buy global telecoms giant Cable & Wireless Worldwide (CWW) for a cash offer of £1.044 Billion (38p per CWW share), which is well above the estimated £700m that had been hinted at during February 2012 (here) when news of the talks first broke.

Vodafone is now set to acquire the entire issued and to be issued ordinary share capital of CWW, which it will use to “strengthen the enterprise business of Vodafone Group in the UK and internationally“. The move is also said to present “attractive network and other cost saving opportunities for Vodafone Group“.

Indeed Vodafone would gain access to CWW’s unbundled (LLU) broadband network in the UK. The LLU network helps to supply a number of smaller and medium sized ISPs, such as Tesco, with flexible broadband internet access solutions. CWW’s UK telecoms and data infrastructure will also help to handle the growing data demands of Vodafone’s Mobile Broadband customers.

John Barton, Chairman of CWW, said:

“Under the leadership of Gavin Darby, Cable & Wireless Worldwide has outlined a strategy to refocus the business on achieving sustainable cash generation and returns from capital invested. However, the offer from Vodafone announced today will enable shareholders to crystallise a value, in cash, that represents a significant premium to recent trading levels and avoid exposure to the risks inevitably presented by executing a medium-term improvement strategy.

Furthermore, the combination with Vodafone represents an exciting opportunity for Cable & Wireless Worldwide’s customers, employees, partners and other stakeholders to benefit from the many advantages that will come from being part of the Vodafone Group.”

Vittorio Colao, CEO of Vodafone Group, said:

“We are pleased to reach agreement with the Board of Cable & Wireless Worldwide, who unanimously recommend our offer. The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations. We look forward to working with the management and employees of Cable & Wireless Worldwide to combine our expertise for the benefit of our customers and shareholders.”

It’s no secret that CWW has been struggling with financial problems, not to mention some all too frequent managerial changes. The company has reportedly lost around three quarters of its share value over the past year alone and recently issued several profit warnings. But for Vodafone the lower value has only made CWW more attractive.

But such a development might worry some of CWW’s LLU partners in the UK because Vodafone has a shaky history in the country’s fixed line broadband ISP market and gave up on its own ‘Vodafone At Home‘ service last December 2011 (here). On the other hand they don’t have any huge incentive left to go penalising their ISP clients.