NEW SITUATION: Cable & Wireless Communications plc (CWC LN): Recommended deal between Liberty Global and C&W plc (CWC) after companies confirmed on 23-Oct-15 that they were in discussions regarding cash and shares offer:
– Terms: Subject to an exchange ratio (with collar structure), freefloat/minority shareholders accepting the offer will receive 0.008301 LBTYA shares (1 vote/share – with collar range of 0.007921 – 0.008301 shares per CWC), 0.020321 LBTYK shares (no votes – with collar range of 0.019391 – 0.020321 shares per CWC) and a 3p cash dividend for each CWC share
– Value: Based on last LBTYA and LBTYK share pricing of $44.10 and 42.64 (both already trading below bottom of $44.51-$46.65 collar range), total offer for minority shareholders represents about GBp 84.06 (14% premium to yesterday’s GBp 73.45 closing price and 50% to unaffected 21-Oct-15 Gbp 58.00 price).
– The three non-free-float shareholders (John Risley, John Malone and Brendan Paddick) who collectively own 35.7% of CWC equity have committed to accepting an alternative, lower valued offer.
– Conditions: The deal is subject to both CWC and Liberty shareholder approvals and regulatory approvals (Bahamas, Barbados, the Cayman Islands, Jamaica, Panama, and Trinidad and Tobago).
– Timing: Scheme Doc is expected to be released within 4 months, with shareholder meetings one month thereafter and scheme is expected to be completed in 2Q 2016.
Typical solid Liberty/Malone deal with low conditionality and some (marginal) timing risk: i) no regulatory risk as Liberty Global is mainly European operator with the only assets in Americas in Chile and Puerto Rico – hence no overlap with CWC or any regulatory risk; and ii) high 50% take out premium and already high 45.37% C&W irrevocables and letters of intent vs required 75% Scheme approval threshold – only uncertainty related to collar mechanism values: unless you can or want to set up spread on (LBTYA AND LBTYK) terms, would buy CWC outright around GBp 76 – allowing for 10% downside buffer for blended Liberty stock.