By Oliver Hirt
ZURICH (Reuters) – Sunrise Communications believes it can win shareholder backing to raise $4.1 billion (3.12 billion pounds) to complete its takeover of Liberty Global’s Swiss business, Chief Executive Olaf Swantee told Reuters.
Swantee said he believed the $6.3 billion deal could still be completed despite Sunrise’s largest shareholder opposing the structure of the deal to buy UPC in a transaction which would transform Switzerland’s telecoms landscape.
The executive has met more than 100 investors to convince them about the deal, which would create a stronger rival to state-controlled Swisscom in providing mobile phone, cable television and internet services.
“We are convinced that we can win the shareholders over to our side,” Swantee said in an interview.
Sunrise announced the deal in February, the latest retreat from Europe by telecoms tycoon John Malone, who has been trimming Liberty Global’s assets in Germany and Austria.
Sunrise said it would finance the deal by raising around $4.1 billion through a rights issue, a level higher than its current market capitalisation of $3.36 billion.
The proposal triggered alarm among investors and led to a sell-off of Sunrise’s stock, which has since lost around 8 percent of its value.
Analysts at Berenberg have described the deal as a mess, highlighting falling operating profit and subscriber numbers at UPC Switzerland.
“At the heart of the problem is that investors are reluctant to buy into Sunrise management’s view that the target, UPC, is only a few quarters away from stabilising its financial performance, which is key to underpinning any belief that the timing and price of the deal makes sense,” the bank said in a note.
German telecoms company Freenet, Sunrise’s largest shareholder with a 24.5 percent stake, said it would not take part in the capital hike saying it was disturbed by how the transaction was structured. It has not said if it would vote for the deal.
“We have been surprised by the demands by Freenet for fundamental changes in the structure of the deal,” said Sunrise Chief Financial Officer Andre Krause.
“All details of the transaction have been discussed by the board over the last year and we have a signed contract.”
Sunrise shareholders will decide at an extraordinary general meeting this year whether to back the capital raising.
Sunrise is hopeful a higher turnout of investors at EGMs means it will win a majority of support. The EGM is due to take place after Switzerland’s competition watchdog finishes its deliberations. Sunrise expects no significant obstacles there, with approval likely coming by September at the latest, it said.
Sunrise’s management is seeking to win approval from other shareholders, with Swantee and Krause having met investors in Britain, North America, France, Germany and Switzerland.
“We have convinced many people with our arguments,” Krause said. “We can create a new national champion which can really challenge Swisscom, drive growth and have real potential for synergies.”
Swantee said the deal would not be renegotiated, despite Freenet wanting the transaction to be reexamined.
“We don’t have a plan B,” he said, saying all options including a minority holding being kept by Liberty have been discussed. “There won’t be a better project for Sunrise in the next few years.”
(Reporting by Oliver Hirt, Writing by John Revill, editing by Michael Shields)