ZURICH (Reuters) - Telecoms group Sunrise Communications (SRCG.S) will next week present a new evaluation with revised savings of its planned takeover of Liberty Global’s (LBTYA.O) Swiss business UPC, in a bid to win sufficient shareholder support for the deal.
Sunrise’s biggest shareholder, German telecoms group Freenet AG (FNTGn.DE), which owns nearly a quarter of Sunrise, opposes the all-cash takeover of UPC to be financed by a rights issue but said last week it was open for more talks.
Sunrise finance chief Andre Krause told Reuters the Swiss group would present the “fairness opinion” with the new synergies which the Swiss group spelled out last week to help seal the 6.3 billion Swiss franc ($6.46 billion) deal.
Freenet wants Liberty Global to maintain a stake in UPC. Liberty said it will not amend the agreed terms.
Morgan Stanley handled an initial “fairness opinion” for Sunrise’s board when the deal was announced. The second one by ValueTrust “will show, just like the first one, that the purchase price was good at the time and is even better now with the improved synergies and UPC performance”, Krause said.
Despite the chill in relations, Sunrise and Freenet can still discuss the transaction that Krause said was backed by most Sunrise shareholders.
“It’s not like we stopped talking,” he told Reuters on the sidelines of a conference on mergers and acquisitions.
“Of course, there’s a bit of frustration at the moment...but we believe in the benefit of the transaction and if sensible discussions with Freenet are possible and useful for that purpose, we’ll have them.”
Discussions could include the future capital structure. Krause acknowledged some investors had questioned the size of the proposed 4.1 billion franc capital increase, which is worth more than Sunrise’s current market capitalization.
“Then we talk to them to find a solution, maybe by taking on a bit more debt,” Krause said.
He pointed out Sunrise had proposed a deferred mandatory note to help finance the deal, but that needed a two-thirds majority and the support of Freenet, which has rejected the idea. A simple majority is needed to approve the capital hike.
“We are getting positive feedback from other investors on the mandatory note and if we see big interest in this instrument, we’d bring it up with Freenet again,” he said.
Freenet, which holds a 24.5% stake in Sunrise, has said it would vote against the rights issue. It needs allies to block the plan at an extraordinary shareholders meeting that would follow anti-trust clearance of the acquisition.
Sunrise stepped up efforts to rescue the deal last week, saying it had identified new cost savings and could cut the size of the rights issue, but still failed to win Freenet over.
UPC Switzerland’s second-quarter revenue fell 3.6% year on year. Investors are closely monitoring the company’s performance to see whether the Sunrise bid is fairly valued.
Sunrise shares gained 0.1% by 1141 GMT while Freenet rose 1.0%.
Additional reporting by Kanishka Singh in Bengaluru and Chris Steitz in Frankfurt; editing by Emelia Sithole-Matarise