For the last two months, Vodafone (NYSE: VOD) has been working up the nerve to pop the question to Cable & Wireless Worldwide. Finally, on Monday, Vodafone formally presented the London-based fixed-line telephone and network services operator with a $1.7 billion offer it hopes C&W's board and shareholders can't refuse.
If the deal goes through, Vodafone could become a supplier of enterprise network services in the U.K. and abroad, and according to the company's statement announcing the offer, it would be able to make use of C&W's global network to offload some of its mobile traffic.
The U.K. is the last major Western European country in which Vodafone does not own a fixed-line network. By acquiring C&W it will gain an enterprise backbone in the U.K., second only to the BT Group (NYSE: BT). C&W presently has 20,500 km of fiber cable -- the largest such network in the UK. It serves over half of the population, covering 400 towns and cities.
C&W has been going downhill since it broke off from its parent company in 2010, and its valuation was sinking deeper than the submarine cables it has been laying down since it laid the first transatlantic cable in 1866. But the company's share price on the London stock exchange has risen 85% since Vodafone first started showing interest in the company in February, and the stock jumped as much as 17% on news of the formal offer.
Vodafone needs 75% of Cable & Wireless' investors to approve the deal and already has the support of 19%. But Orbis Holdings, which owns another 19% slice of C&W shares, told Bloomberg in a statement, "We are concerned that the offer price does not appear to reflect the value inherent in CWW."
But Evan Miller, a managing director of Gamco Investors (NYSE: GBL), which owns 1% of C&W, thinks shareholders should not be too coy regarding the offer. "I don't see that there's going to be another Vodafone on the scene," he warned.
Vodafone had one rival in its quest for C&W, but Tata (NYSE: TCL) withdrew from the bidding last week.
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