By John Miller and Silke Koltrowitz
ZURICH (Reuters) – Swiss telecoms firm Sunrise Communications on Thursday stepped up efforts to rescue its takeover of Liberty Global’s Swiss unit amid criticism from its top shareholder, saying it had found new synergies and could cut a planned rights issue to fund the deal.
German telecoms group Freenet <FNTGn.DE>, Sunrise’s <SRCG.S> largest investor, has called the all-cash 6.3 billion Swiss franc (5.30 billion pounds) takeover of UPC Switzerland unfavourable for Sunrise shareholders and has asked for the price to be cut and risks reallocated.
Criticising Freenet’s opposition as “self-serving”, Sunrise touted updated expectations of 280 million francs in annual synergies from buying the Liberty <LBTYA.O> business, 45 million more than previously forecast.
Freenet was not immediately available to comment.
Sunrise said these benefits, along with the improved performance of UPC since the deal was announced, would allow it to increase leverage and reduce the proposed 4.1 billion franc rights issue needed to pay for the deal by 1 billion francs.
Sunrise added Freenet had rejected its proposed changes.
“Sunrise views Freenet as guided by its own short-term financial constraints and self-serving objectives which it seeks to solve at the expense of Sunrise and its shareholders,” Sunrise said, adding its board would now bar Freenet from deliberations.
One-off integration costs needed to achieve the higher synergies are expected to increase from 140-150 million to 230-250 million francs, Sunrise said.
Sunrise’s second-quarter net income rose to 27 million francs, from 24 million francs in the year-earlier period, the company said. Revenue fell 1.7% to 455 million francs, which Sunrise said resulted from lower mobile hardware and hubbing sales.
The deal, seen closing at the end of November, awaits approval from Swiss competition regulators, followed by a shareholders’ vote on the rights issue.
Freenet’s vow to vote its 24.5% stake against the issue could stymie the takeover if other shareholders join the opposition.
Sunrise CEO Olaf Swantee, whose pursuit of UPC comes amid European industry consolidation being driven by narrowing margins and mounting costs to launch faster 5G services, is hoping UPC will help him to better compete in Switzerland with the country’s dominant communication provider, government-controlled Swisscom <SCMN.S>.
Freenet CEO Christoph Vilanek, meanwhile, has said UPC has resorted to heavy discounting to support its business.
Freenet has said it will not participate in the rights issue, meaning its Sunrise stake would be diluted. Vilanek is pursuing changes in the proposal he has said would “optimise its structure.”
Liberty, set up by U.S. cable pioneer John Malone, is selling off some assets. In December, it said it would sell its DTH satellite TV operations, which serves four eastern European markets, to M7 Group.
(Reporting by John Miller, Editing by Silke Koltrowitz and Mark Potter)