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C&W ‘revives demerger plans’
02 November 2009
Cable & Wireless has revived its plans to divide the company into two, one mainly based on the old Energis operation in Europe and the other on its incumbent operations in the Caribbean
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Comment: When Cable & Wireless boss John Pluthero put the demerger plans on hold in the wake of the financial crisis, it was clear that he would revive them as soon as the economic position revived enough. In the meantime the company has been splitting operationally, with a single management and new brand for its Caribbean business, and separate units for the old Energis operations in the UK and for the Africa and Asia-Pacific business. It will be interesting to see if the revelation brings suitors to take over parts of the group before it incurrs the cost of a demerger.
Cable & Wireless is planning a £3.6 billion demerger of its UK and international businesses. According to reports, the company is looking to split Cable & Wireless International, which mostly serves domestic customers as an incumbent in the Caribbean, from Cable & Wireless Worldwide, its UK and European fixed-line operations servicing businesses.
C&W had postponed the plan to demerge the two businesses in 2008 due to the financial crisis. Another reason for the delay was the difficulty in arranging credit facilities for C&W’s UK business.
C&W Worldwide is now cashflow positive and C&W International is believed to have several suitors. Investors are hoping that a division of the two operations, seen as part of the company’s “valuation realisation” initiative, will lead to a special dividend payment.
The revival of the demerger plans is due to weak performance by C&W’s shares this year. The Caribbean operations — which have been rebranded as Lime — have suffered because of falling tourist numbers, while the UK business — largely created from the takeover of Energis in 2005 — has been affected by a combination of economic and regulatory pressures.
C&W International — which is calling itself CWIG for the moment — also includes the incumbent operation in Monaco and has a business providing communications in Africa and Asia. GTB