FRANKFURT (Reuters) – Freenet AG <FNTGn.DE> said on Friday it would vote against a proposed 4.1 billion Swiss franc (3.45 billion pounds) capital hike at Sunrise Communications <SRCG.S> to fund a takeover bid for Liberty Global’s <LBTYA.O> Swiss unit UPC.
The German telecoms firm, which owns 24.5% of Sunrise, said it was not satisfied with the 6.3 billion franc bid for UPC, whose price and structure was “unbalanced and unfavourable for all Sunrise shareholders”.
The all-cash deal, struck in February, stalled two months later when Freenet blocked Sunrise’s plans to authorise fresh capital. Amid the standoff, attention has focused on whether UPC’s performance can support the deal valuation.
UPC last week reported a slightly narrower 3.6% fall in revenue in the second quarter, which Sunrise said showed that a turnaround was gaining traction and justified its commitment to the transaction.
Freenet, in an ad hoc statement, said however that the deal valuation was not supported by UPC’s results: “For a fair transaction for all Sunrise shareholders, the purchase price should be lowered.”
It added that cost savings from the deal would accrue to Liberty in advance, while the all-cash deal structure would leave Sunrise holding all of the execution risks.
“Liberty Global should receive a stake in the combined entity, creating a more adequate risk and upside sharing setup,” Freenet said.
No date has yet been set by Sunrise for an extraordinary shareholders meeting to vote on the capital hike. The deal is still awaiting anti-trust approvals. A simple majority of shares outstanding would be required for it to go ahead.
Shares in Freenet firmed while Sunrise rose 3.5% in early trading in Zurich.
(Reporting by Douglas Busvine, editing by Riham Alkousaa and Michael Shields)