Over the weekend, rumors started to spread that Vodafone Group (NYSE:VOD, news, filings) is looking at a possible purchase of Cable & Wireless Worldwide. And in fact today Vodafone has confirmed that it is in the “very early stages of evaluating the merits of a potential offer.” Such a deal would give Vodafone a global backbone as well as an enterprise-focused fiber network in the UK to go with its various wireless assets worldwide and UK footprint.
It’s not the first time in recent quarters that C&W Worldwide has been the subject of M&A interest. In June of last year Pacnet supposedly offered in the neighborhood of $500M for the company’s international assets, but was rebuffed at the time. Vodafone’s potential bid for the company is hypothesized to be more like £700 for the full company, which may be another matter entirely. Or maybe they’re both too low, asset valuations across the Atlantic these days always look low to me in comparison. I don’t follow C&W Worldwide closely, but their interim report in the fall had them at an annual run rate of £350-400M in EBITDA on £2.1B or so in revenue with negligible net debt didn’t it? I must be missing something.
After the initial approach, Vodafone has until March 12 to make up their mind whether to make an actual offer. I’m guessing they will manage to put one together, though it remains to see how sweet the deal would be. Given that C&W Worldwide’s CEO Gavin Darby was previously the head of Vodafone UK, it seems likely that there will be few surprises to uncover in the due diligence.
A Vodafone/CW&W matchup would make some sense, although there are probably other buyers that could find more available synergies. Hmmm, maybe Pacnet will try again? Or perhaps there is a chance that Level 3 might take a swing at some more global assets and yet more scale in the UK?
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