It was just two weeks ago that Vodafone Group (NYSE:VOD, news, filings) agreed to purchase C&W Worldwide after a two month competitive sale process. But the deal may already be on the rocks according to the UK's Guardian. While the board agreed to the purchase and several large shareholders supported it (RBC, Sky, and Cyrte), one major shareholder did not and seems ready to stand in the way of the deal.
Orbis, an investment fund that owns 19% of the Cable & Wireless's shares, isn't at all happy with the valuation. In the UK, apparently one needs the backing of 75% of shareholders, so 19% saying no is already three quarters of the way to defeating the deal. According to Orbis:
[Orbis] declined to give an irrevocable undertaking to back the Vodafone bid because we do not believe it reflects CWW's true value. We are evaluating our options, including remaining a minority shareholder in CWW as we did in 2010/11 in Océ after Canon's bid, knowing very well the risk that Vodafone may withdraw its offer and CWW's share price may fall in the short term. Ultimately, we shall endeavor to do whatever we believe is most likely to create long-term value for our clients, even if this comes at the cost of short-term share price volatility.
So maybe Vodafone doesn't win after all?
On the valuation disagreement, I tend to agree with Orbis. Fiber valuations in Europe are pathetic, and selling now is more than likely to catch the bottom. But on the other hand, Cable & Wireless has struggled to find its footing for some time now and a sale might be the best way to rejuvenate the assets. If not Vodafone or Tata, then who?
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