C&W details plan to split in two
By Robert Barr
LONDON (AP) — Telecommunication company Cable and Wireless PLC detailed Tuesday its long-awaited plan to split itself into two companies by March 31.
The company also launched a convertible bond issue of £200 million ($340 million) to support the new Worldwide company. Worldwide provides corporate and carrier services, earning most of its revenue in the UK.
The other new company, CWI, offers mobile and fixed-line services in 33 countries, and is a major player in the Caribbean, Panama, Macau and Monaco.
Cable and Wireless shareholders will get one share in each of the new companies for each share of the current company. Cable and Wireless chairman Richard Lapthorne will chair CWI with Tony Rice as chief executive. Worldwide's chairman will be John Pluthero and Jim Marsh will be CEO.
Both new companies will be listed on the London Stock Exchange.
Analysts gave the plan mixed reviews, but Cable and Wireless shares were up 2.3 percent at 141.5 pence in midday trading on the London Stock Exchange.
Earlier this month, Cable and Wireless announced a net profit of £120 million ($198 million) for the six months ending September 30, compared with £83 million a year ago.
Revenue rose from £1.65 billion to £1.86 billion in the current year.
"Since 2003, we have successfully transformed the business to the point that we now have two strong businesses that are ready to stand on their own as separately listed companies," Lapthorne said.
Morten Singleton, analyst at Collins Stewart, said he was pleased that management was not making a quick killing.
"We are pleased to see that the executive plans will not vest on the demerger realization event, but, subject to the necessary approvals, incentive plans will be treated consistently and continue to run to their planned vesting and maturity dates," he said.
Mick Gilligan, head of research at Killik & Co., was skeptical that separating the two units would produce further value for shareholders.
"We are still to be convinced of the merits of a demerger given the relative attractiveness of each business as standalone entities. One hope is the split attracts a trade buyer for one or both divisions," Gilligan said.
Jonathan Groocock at Investec Securities said he saw no gain in the plan.
"Without an improved capital structure, we see no value crystallized on demerger, and hopes for an asset sale are waning. Meanwhile, fundamentals are very poor," he said.
Cable and Wireless traces its origins to the development of telegraphy in the 19th century. Several small companies merged in 1872 to form the Eastern Telegraph Co., linking London with India, Malta and Egypt. The Cable and Wireless name dates from 1934, reflecting the company's move into radio as well as cable links.
