Sunrise changes funding plans for $6.3bn UPC deal
Swiss group slashes rights issue to save purchase of Liberty Global unit from investor backlash
Swiss mobile phone company Sunrise Communications has overhauled the financing plan for its $6.3bn takeover of Liberty Global’s local cable business to appease a shareholder backlash against the deal.
The acquisition of UPC, part of Liberty’s dwindling European empire, was agreed in February and welcomed as a sign of growing confidence among European telecoms companies to pursue consolidation.
However, the mobile company run by former EE chief executive Olaf Swantee faced an uphill task to finance the deal after its largest shareholder, Germany’s Freenet, said it opposed a rights issue proposed by the Swiss company representing 130 per cent of its value.
Sunrise has moved to slash the size of the rights issue by a third after engineering a new funding plan following meetings in recent weeks with 200 shareholders. That will involve taking on much more debt but Mr Swantee told the Financial Times it could justify this because of a new plan to reap much higher synergies from the merger of the Swiss mobile and cable networks.
That was not enough to win the support of Freenet, a 25 per cent stakeholder in Sunrise, which said it would continue to oppose the deal. “It becomes obvious that the deal as such has lost its strategic rationale,” said a Freenet spokeswoman.
Mr Swantee said he was sanguine about Freenet’s continued opposition as the company only needed just over 50 per cent of shareholders to vote for the UPC takeover at a meeting in late October. “We will focus on the 75 per cent. We are not counting on their support,” he said.
He added that the deal already had regulatory approval and that UPC’s performance had started to improve, making the rationale for the merger in the competitive Swiss market more apparent.
“If we don’t execute it then someone else will and we will be left on the fence,” he said.
Ulrich Rathe, an analyst with Jefferies, said the likelihood of the deal proceeding had “clearly increased overall from the 60-40 odds” it estimated in September, but that approval was by no means guaranteed.
Sunrise shares were down 3 per cent in early afternoon trading in Zurich.