Sunrise Communications Group bowed to investor pressure yesterday and scrapped its 6.3bn Swiss franc ($6.39bn) acquisition of Liberty Global\u2019s Swiss cable business UPC.
\nThe number two Swiss telecommunications group had battled to save the deal in the face of opposition from its biggest shareholder, Germany\u2019s Freenet, which holds 25% of its stock, and activist investors including Axxion and AOC.
\n\u201cThis is a missed opportunity to promote competition in the Swiss market,\u201d said Sunrise chief executive Olaf Swantee, who had planned to bundle mobile, broadband, TV and fixed-line products to close the gap to market leader Swisscom.
\nSunrise will now focus on going it alone, top managers said, stressing that its dividend was not at risk from transaction costs and a 50mn Swiss franc break fee it owes Liberty Global, a firm set up by US cable pioneer John Malone.
\nThe company cancelled an extraordinary shareholder meeting (EGM) planned for today to approve a 2.8bn franc cash call needed to finance the UPC deal, avoiding an embarrassing defeat on the measure.
\nFreenet and other investors had opposed the rights issue even in its scaled-down form, saying the takeover was too expensive, improperly financed and strategically flawed.
\nInfluential proxy adviser ISS helped doom the deal by recommending shareholders oppose it.
\n\u201cWe regret cancelling the EGM. We have spent a significant amount of time engaging with our shareholders and continue to believe in the compelling strategic and financial rationale of the acquisition,\u201d Sunrise chairman Peter Kurer said.
\nNot even support from investment banks UBS, Deutsche Bank, Morgan Stanley, Credit Suisse and Goldman Sachs was able to help Sunrise get the deal across the finish line.
\nAlthough the share purchase agreement technically remains in force until late February, Sunrise made clear the deal was effectively dead.
\n\u201cManagement is now really focused on implementing the standalone strategy. We respect the decision of the shareholders,\u201d Swantee told Reuters, adding he did not expect to resume negotiations with Liberty Global.
\nAsked about his future after championing a deal that went awry, Swantee said only: \u201cOur priority is stabilising Sunrise.\u201d
\nKurer, who has said he would likely be voted out of office if the deal failed, was also under fire. \u201cWe expect that he will now draw the consequences and immediately resign as chairman,\u201d activist AOC said.
\nSunrise shares, which had fallen more than 10% this year, gained 2.7% by 1230 GMT. Freenet boss Christian Vilanek saw more room for them to rise. \u201cIf we all pull together the stock can rise significantly over the next 12 to 24 months,\u201d he said, adding Freenet had no plans to divest its Sunrise stake.
\nAnalysts said the collapse would ease pressure on prices in the Swiss market. \u201cSwisscom receives a \u2018get out of jail free\u2019 card,\u201d Berenberg analyst Usman Ghazi said.
\nThe future of UPC remained in limbo.
\nGhazi said he doubted UPC would join forces with Salt, the third big Swiss player, but an investment banker involved in the deal said this was clearly a possibility, if not in the immediate future.
\nLiberty Global, which is exiting several European markets, was unlikely to change course and become a buyer, analysts said.
\nUPC Swiss head Severina Pascu said her operation remained a successful company with a strong standalone strategy.<\/p>\n","protected":false},"excerpt":{"rendered":"
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