6th Jun 2008 16:02
6th June 2008
THUS: Rejection of Cable & Wireless Proposal
The Board of THUS Group plc ("THUS" or the "Company") notes the announcement made by Cable & Wireless plc ("C&W") and the pre-conditional possible offer of 165p per share from Cable & Wireless plc (the "Proposal").
Today's announcement by C&W is in line with its original approach on 28 May which was unanimously rejected by the THUS Board on the basis that it fails to reflect the standalone value of the THUS business and denies THUS shareholders the opportunity to benefit from the substantial synergies that the Board believes will be available from the long-anticipated consolidation in the UK telecommunication market.
In the opinion of the THUS Board, THUS' next-generation network and customer contracts will be critical to maximising the potential of C&W UK. THUS shareholders deserve recognition of this value in the Proposal price.
Stand-alone valuation
The C&W Proposal fails to reflect the standalone value of the THUS business before attaching any takeover premium. The Proposal price values THUS at an acquisition multiple of only 5.9x historical EBITDA. This figure is materially below the comparable trading multiple for C&W at 6.8x, even before account is taken of the considerable synergies which C&W would realise on an acquisition of THUS.
THUS' net assets value, which reflects the investment made to date in its advanced next-generation network, was £461 million at 31 March 2008, equating to approximately 252 pence per share.
Value of synergies
The C&W Proposal also fails to reflect the substantial synergies which the Board firmly believes would be realised through industry consolidation. THUS' integration experience, in particular in relation to the Your Communications acquisition, supports the conclusion that considerable network, property and staff efficiency savings would be realised on any combination. THUS continues to expect to deliver cost synergies of £30 million per annum on the acquisition of Your Communications, a business which for the financial year ended 31 March 2006 had revenues of c. £190 million per annum vs. £576 million for THUS for the financial year ended 31 March 2008.
The Board notes that, at the time of its acquisition of Energis in August 2005, C&W disclosed that it expected network, SG&A and capex synergies to total c. £80 million in the second year after acquisition, amounting to approximately 11% of Energis' historical revenues of £720 million in the financial year 31 December 2005.
Independent future
THUS is confident in its future as an independent group:
THUS has invested to build an extensive UK fibre optic network which, unlike those of major competitors, has been designed to support next-generation communications since its inception. The unique characteristics of this infrastructure enables THUS to deliver customer benefits, evidenced by the fact that next-generation services accounted for over 70% of new major corporate and public sector contracts signed in the last financial year. The new products, services and technology that the Company currently offers, with new services under development from its proven service innovation capability, are expected to drive further growth.
On 21 May 2008, THUS released preliminary results for the year ended 31 March 2008 with EBITDA of £57.0 million, representing an increase of 33% vs. the prior year and an improved EBITDA margin of 10.3% in the second half of the financial year. The Company also announced strong cashflow performance, with a free cash inflow of £6.9 million in the second half of the financial year, the continuation of THUS' sustained progress towards cashflow generation.
Over the last 5 years, THUS has consistently delivered annual revenue growth and successfully expanded market share each year.
Conclusion
Over the last 9 days, there have been three separate telephone discussions and a meeting between the Chairmen of THUS and of C&W and the advisers to each company have met. In a letter dated 4 June 2008 the Chairman of C&W referred to seeking agreement "within the narrow price band which our respective shareholders would understand and consider sensible".
The Board of THUS remains focused on delivering maximum value for shareholders and will evaluate any proposal from any third party against the value that the Company can deliver as an independent group.
Enquiries:
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Smithfield
(PR adviser to THUS)
John Antcliffe
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Telephone: +44 (0)20 7360 4900
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GREENHILL
(Financial adviser to THUS)
James Lupton
David Wyles
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Telephone: +44 (0)20 7198 7400
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Sources and bases:
The THUS multiple of 5.9x is calculated as the Proposal price of 165 pence per ordinary share, multiplied by THUS' outstanding shares of 183,032,367 at the close of 27 May 2008 plus actual net debt of £31.9 million as of 31 March 2008, the total divided by EBITDA for the financial year ended 31 March 2008 of £57.0 million.
The C&W multiple of 6.8x is calculated as the C&W closing price on 5 June 2008 of 168 pence per ordinary share, multiplied by C&W outstanding shares of 2,491,917,328 ordinary shares less net cash of £51.0 million as of 31 March 2008, the total divided by EBITDA for the financial year ended 31 March 2008 of £605.0 million.
Greenhill & Co International LLP ("Greenhill") is acting exclusively for THUS and for no-one else in connection with any offer and will not be responsible to anyone other than THUS for providing the protections afforded to clients of Greenhill or for providing advice in relation to any offer or any other matters referred to in this announcement.
Related Shares:
CWC.L