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C&W stock slides after sale
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March 15, 1999: 7:39 a.m. ET
Shares dip despite bid speculation over U.K. telecom firm's 'eclectic assets'
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LONDON (CNNfn) - Cable & Wireless stock slipped sharply in London Monday, despite speculation that the U.K. telecom company could be a bid target for Hong Kong's Hutchison Whampoa or even Deutsche Telekom.
The shares fell after Germany's Veba announced the sale of its 10.2 percent stake in C&W at a hefty 11.5 percent discount to Friday's close. Veba bought the stake in 1995 for 2.5 billion marks ($1.4 billion) as part of a joint venture unwound two years later.
Analysts have played down the possibility of an immediate bid for C&W (CW.) believing institutional investors may be taking the opportunity to pick up cheap stock. "Cable & Wireless owns a fairly eclectic bunch of assets which no single buyer is likely to want," said Nigel Hawkins, telecom analyst at Williams de Broe.
Veba's (VBA) stock remained virtually unchanged after the deal. Though the company is not highly leveraged, it is looking to boost its investment in the fast-growing German mobile sector where its own operation is trading at a loss after heavy start-up costs.
ABN-Amro and Cazenove sold the Veba stake for 735 pence compared with Friday's close of 830 pence. Though market sources indicated the shares went to Asia, Hutchison Whampoa was quick to deny it was the buyer. The Hong Kong company's shares climbed almost 5 percent to HK$63 in Monday trading.
Despite denials from Hutchison and Deutsche Telekom (FDTE), the possibility of a bid was enough to send BT's (BT.A) shares reeling as investors weighed the potential impact of a strengthened C&W on the U.K. giant. The two sides discussed their own merger plan last year.
C&W shares have risen steadily on expectations that it will float its One2One mobile operation. One2One's cellular rival is controlled by Hutchison. C&W's Internet business is also an attractive asset but the political sensitivity of purchasing the group's stake in Hong Kong Telecom has kept potential bidders at bay in the past.
Speculation of a bid for C&W heightened recently when well-regarded CEO Dick Brown defected to head Electronic Data Systems in the U.S.
Hutchison has raised more than HK10 billion ($1.3 billion) in cash since the start of the year, raising suspicions it might be gathering a war chest for a major deal, but analysts said it was too early to say whether the group will focus on the telecom sector for an acquisition.
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Cable & Wireless
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