C&W ripe for take over, says analysts
Local Cable & Wireless officials were today mum about a possible takeover bid by international telecommunications provider Liberty Global, but two observers described the move as an interesting development.
Telecommunications analyst Hallam Hope told Barbados TODAY he was not surprised by the move, suggesting that the merged operations of LIME and FLOW was a tempting pick for any major global player.
“I have always suggested that it would be a cherry for the picking given the fact there was quite some debt that had been built up as a result the merger. In addition to that I would like to remind people that the LIME and the Cable & Wireless of 2015 is not the LIME and Cable & Wireless of 2003 when we had a very important rate hearing. At that time LIME had a return on investment of four times or more, more than a monopoly like the Barbados Light & Power had. LIME was doing very well. Since then, as a result of competition, their financial standing has deteriorated. It is not that rosy picture anymore, so it could very well be that the new merged company is ripe for takeover.”
Yesterday, the international companies confirmed in separate statements that they were in discussion about the offer by Liberty Global to acquire C&W for cash and shares.
In its statement, Cable & Wireless however asked its shareholders not to take any action.
“There can be no certainty that any firm offer will be made or as to the terms on which any firm offer might be made,” it warned.
For its part Liberty Global said, “this announcement does not amount to an announcement of a firm intention to make an offer under Rule 2.7 of the City Code on Takeovers and Mergers (the “Code”). There can be no certainty that any offer will be made or on the terms on which any offer might be made. A further announcement will be made as appropriate”.
Hope noted that the Liberty Global owner John Malone was in a strong position given the fact that he already has a stake in C&W which he acquired when the company sealed a $1.85 billion deal to take over Columbus International in November last year.
“John Malone already a 25 per cent stake or voting stake in the merged company. He already has quite some influence in terms of the company’s direction. The question is really whether it fits into Liberty Global’s plan to expand.”
Analysts say it is too early to assess the implications of the proposed take over for Barbados and other Caribbean countries which were still trying to adjust the FLOW/LIME deal.
However, Hope noted that there were clear advantages for Liberty Global which operates in 14 countries.
“I can see some commonalities. The new merged company is focused on what they call quad play, where they are providing all the services, entertainment news, digital media, mobile phones, everything, so is Liberty Global. “Another advantage that could be seen from the acquisition, it would give Liberty a cellular provider, which it does not have at the moment. So they would also enter a new market as well. Bear in mind that companies of this scale are global players. There are already into Latin America, North America and the Caribbean would be another piece in their global pie.”
Director-General of the Barbados Consumer Rights Organization Malcolm Gibbs-Taitt was also keeping a close eye on the new development.
“Given that they have tried to takeover FLOW it would be interesting to see if somebody would be able to take over them,” he told Barbados TODAY.
He agreed that while Liberty Global was yet to make a formal offer, he was prepared to welcome a new player to market.
“. . . it would not bother me if someone else take it over. I would hedge any bet I have and suggests that the other player would have to be better than Cable and Wireless,” Gibbs-Taitt said.