(Reuters) - Shareholders of Spanish cable group Ono on Thursday approved plans for a stock market listing, while the company's board is still mulling a takeover approach from Britain's Vodafone, two sources close to the matter said.
"For now, the shareholders have given the go-ahead for the launch of a stock market listing, but that does not mean that in the coming days a deal won't be reached with Vodafone and that the company won't be sold," said one of the Spanish group's shareholders.
Ono declined to comment. Another source said that the board of private equity-backed Ono had begun a meeting after a shareholder gathering finished on Thursday, and it was due to discuss Vodafone's offer.
Vodafone raised its initial bid for Ono, sources said last week. Ono had rebuffed an earlier offer in February and said then it would press ahead with plans for a flotation that would value the company at 7 billion euros ($9.7 billion). ($1 = 0.7192 euros) (Reporting by Robert Hetz, Writing by Sarah White, Editing by Tracy Rucinski)
Sentiment: Strong Buy
Still, AT&T isn't wrong in pointing out that things have changed since it first expressed interest in Europe, most significantly the gap between its valuation and Vodafone's. While AT&T's stock once traded at a premium to Vodafone, excluding Verizon Wireless, it now trades at a discount: 5.6 times 2014 earnings before interest, taxes, depreciation and amortization, against 6.7 times for Vodafone. For AT&T, that makes it even less appealing to do a deal that already came with few apparent synergies and questionable growth opportunities.
And it has other options. A U.S.-focused AT&T might be better served, for example, by buying Dish Network. DISH -0.61% AT&T would likely need to pay a significant premium to get Dish's chairman, Charlie Ergen, to cede control. But buying Dish would give AT&T access to the wireless spectrum that the satellite-TV provider has amassed. This would help AT&T defend its existing wireless business and keep that spectrum out of competitors' hands.
Investors shouldn't stop reading between AT&T's lines. But they may be better off if its recent comments aren't bluster, just straight talking.
AT&T Should Phone Home
The Company's Pessimistic Signals About a Deal With Vodafone May Be Just Tactical, but Investors Could Do Without That Deal
AT&T T +0.05% seems uneasy about springing for that long-distance call to Europe. And that could be a good thing for its shareholders.
Chief Financial Officer John Stephens said Wednesday that AT&T's "window of opportunity" for buying a European asset may be closing. His comments echoed Chief Executive Randall Stephenson's last week.
Mr. Stephens said AT&T still sees opportunity in Europe, but that the success of its own investment plan and new competitive threats such as a potentially combined Comcast-Time Warner Cable had put its focus "clearly" on the U.S.
AT&T may simply be trying to drive down the price of its rumored target, Vodafone. VOD.LN -1.33% The latter's shares have fallen nearly 8% in the past week. While it made sense for AT&T to broadcast its intentions in Europe while trying to lobby regulators there, it makes less sense now. Verizon Communications's VZ -0.20% deal to buy the rest of Verizon Wireless from Vodafone has closed, clearing the way for AT&T.
AT&T is limited for the next few months to doing a deal backed by Vodafone's board because of U.K. takeover rules. Its recent comments may also have been aimed at pressing Vodafone to initiate deal talks.
Mr. Stephens cited progress in Europe toward rolling out LTE networks—a shift AT&T had hoped to benefit from—as an opportunity that might be slipping away. Vodafone recently launched its own investment program. But spending on that is just beginning, suggesting there may still be time for AT&T to capitalize on it.
Vodafone stock had its “overweight” rating restated by analysts at Barclays in a research report issued to clients and investors on Thursday, AnalystRatings.Net reports. They currently have a GBX 260 ($4.35) target price on the stock. Barclays’ target price would indicate a potential upside of 13.55% from the
Sentiment: Strong Buy
IMO, that possibility has already been factored into the price along with the possibility that T will not acquire VOD.
Sentiment: Strong Buy
The acquisition will probably be announced today. If it knocks the stock down into the low $36 area, I'll add. Meanwhile, both Colao and Randy are singing Tom Petty--Don't Come Around Here No More and Stop Draggin' My Heart Around, respectively.
#4 The Bouygues bid had initially been seen as a long-shot against a competing offer from cable-investment firm Altice SA, because France's antitrust chief Bruno Lasserre had publicly said last year that he opposed reducing the number of mobile operators in France. But after Bouygues agreed over the weekend to sell its entire mobile network to smaller competitor Iliad SA in the event of a deal, he appeared to soften his position in a newspaper interview, saying the Iliad offer could speed up his review. A spokesman for the antitrust agency said it would maintain "absolute neutrality."
Vivendi's board is expected to meet Friday, and could decide then on a bid, the people close to the deal said.
"If one of the cornerstones of Europe decides to go from four to three, that could force a change in direction across Europe," said one investment banker not involved in the transaction. "Now it looks like every deal you've ever thought of is possible."
While everyone's grabbing a chair, does T really think its going to get invited? T better jump in and start grabbing or accept a slow, slow demise in the USA...Time waits for no man!
#3: Some of the biggest telecom operators in Europe appear to be preparing themselves for battle and gaming-out options. Telefonica, for instance, was reluctantly drawn into making a deeper investment in Telecom Italia SpA last year, according to people familiar with the matter. It wants to use its stake to influence talks over Telecom Italia's operations in Brazil, where the two are rivals, but may well be forced to take a more direct role in Italy, depending on future regulatory development, those people said.
Vodafone, for its part, is under pressure to use cash from its landmark $130 billion sale of its stake in Verizon Wireless to shore up its flagging businesses, notably across its southern European markets, where pinched consumer spending in recession-hit economies have rattled results.
In Spain, Vodafone is considering a bid of EUR7 billion or more for Spanish cable operator Ono, according to people familiar with the matter. One potential trigger for a deal: Ono's shareholders are to hold their annual meeting Thursday and, barring an attractive offer by Vodafone or some other buyer, are expected to approve plans for an April listing on the Madrid stock exchange.
France--seen as a telecom wasteland by investors because of harsh competition--may end up as a surprise turning point in the continent's consolidation project. Conglomerate Bouygues SA last week bid EUR10.5 billion in cash to merge its French telecom unit with SFR, a deal that would reduce the number of mobile operators in the country from four to three.
#2. Momentum appears to be on the operators' side. Buyers have announced more than $50 billion in offers for European telecom companies so far this year, according to Dealogic, more than in the corresponding period of previous years since at least 2000. Last year, companies announced $129 billion in deals targeting European telecom firms, the largest amount since 2005, Dealogic said.
Multiple factors are fueling the consolidation drive, bankers and analysts say. Operators, which have long pushed for consolidation, are worried that cheap debt underpinned by historically low interest rates could get more expensive as the European economy recovers. A rising stock market has also led to more public offerings, putting more companies in play. At the same time, executives are worried about being locked out by bigger competitors, including from overseas.
For more than a year, AT&T Inc. has shown an interest in acquiring wireless operations in Europe. Hong Kong's acquisitive Hutchison Whampoa, has itself been on a European spree, agreeing last summer to buy Telefonica's Irish unit for EUR850 million ($1.18 billion), in a deal still under regulatory review. The company said earlier this month that it is looking to expand generally in Europe.
In Italy, for instance, analysts have repeatedly said a merger between Hutchison's 3 Italia and VimpelCom Ltd.'s Wind Telecomunicazioni could make the market more competitive. Last week Jo Lunder, chief executive of Wind owner, said he is open to deals.
"It is like a big game of Risk, and no one wants to end up with Kamchatka," said Robin Bienenstock, an analyst at Sanford C. Bernstein, referring to an undesirable territory in the popular strategy game. "The permutations are endless and the bankers are having a great time."
1. Europe's Telecom Companies Push to Consolidate
By Sam Schechner
PARIS--European telecom executives are working the phones. From France, to Spain, to Germany, they are pushing forward with a round of deal making, raising pressure on regulators to bless a consolidation drive across the region's fragmented array of operators.
Vivendi SA could decide as early as Friday between two competing bidders for its struggling French telecom unit SFR, according to people close to the deal. British giant Vodafone Group PLC is likely to decide this week whether to make a $10 billion bid for Spanish cable operator Ono SA. Buyers are also kicking tires for potential purchases or mergers in Italy and Nordic countries, according to bankers.
The result could be a radical reshaping of Europe's telecommunications landscape, as companies rush to absorb smaller operators in individual countries and then move on to bigger cross-border deals in a race for scale. Across the European Union, well over 100 fixed and mobile operators are owned by dozens of companies--and operators argue they are too fragmented to keep up with heavy investments in new networks. "Consolidation is going to pick up pace in Europe," Orange SA Chief Executive Stephane Richard said on a conference call last week. "We believe that it is unavoidable."
The growing pipeline of deals is the latest strategy of European telecom executives, as they try to force regulators across the continent to allow mergers in the same country. Despite concerns aired by Brussels last month over Telefonica SA's agreement to merge its German mobile-phone unit with that of Royal KPN NV, more firms are coming out of the woodwork with deals of their own.
Momentum appears to be on the operators' side. Buyers have announced more than $50 billion in offers for European telecom companies so far this year, according to Dealogic, more than in the corresponding period of previous years since at least 2000.
It is getting pretty close in relative terms. 360p/share still my target figure. It is within spitting distance on conversion for 150B. Time for the two big boys that wear the top hat to sit down with a cup of coffee and put together a deal. This is going to be one monster of a telecom that would be awesome for M2M global synergies. T has to be well aware of £ knocking against a breakout. JMHO.... £ and additional financing costs going forward are the urgency factor. Think the Ono purchase is a solid acquisition acting as a red herring. A couple analysts talking 1.80s £ later in the year which pushes costs significantly higher. Needs to happen before the £ moves higher which will quite likely happen before 6 mo restriction is over. Colao, time to put on the deal hat.
Sentiment: Strong Buy
Smalls, as far as timing goes, this makes a summer or 2H14 deal most likely:
"But it’s a technicality that now means under U.K. takeover rules, AT&T can’t approach Vodafone until the summer. The companies can, however, hold talks sooner if they are initiated by Vodafone."
Recent T chatter may be sweet talk meant for VOD, but it may be falling on deaf ears. Barron's Tech Trader Daily says,
"At a conference Wednesday, AT&T (T) Chief Executive Randall Stephenson repeated a warning that the window for a wireless deal in Europe may be closing. AT&T is attempting to bring Vodafone Group (VOD) ”to the table and condition its expectations about price,” writes Thomas Gryta in the Wall Street Journal. (See “Takeover Time? AT&T Winks at Vodafone, Then Winks Harder,” subscription required."
“A deal for Vodafone could cost $150 billion, according to New Street Research.”
At $150B little on the low side.
Sentiment: Strong Buy
Mr. Stephenson privately told investors that he is more interested in wireless in Europe and wouldn’t make the same moves into cable that Vodafone is contemplating, according to people familiar with the conversation. AT&T, meanwhile, is a bit stuck. It told U.K. takeover authorities in January that it didn’t intend to bid for Vodafone. That was before Vodafone had completed its deal with Verizon, and AT&T officials called it a technicality. But it’s a technicality that now means under U.K. takeover rules, AT&T can’t approach Vodafone until the summer. The companies can, however, hold talks sooner if they are initiated by Vodafone.
AT&T has grown through regular deals, but has reached the limit in the U.S. wireless market and has been looking to Europe for growth. Its executives say they expect wireless data use to grow in Europe as it has in the U.S., as mobile networks are upgraded to next generation technology. But European carriers are making those investments themselves, AT&T says. Meanwhile, Comcast’s $45.2 billion deal to buy could create a giant new broadband rival in AT&T’s backyard. All of that “now puts our focus in the United States, clearly in the United States,” Mr. Stephens said Wednesday. While the message is clear on the surface, AT&T isn’t saying that it has abandoned its interest in Europe. The new comments may just be a way of saying that time is limited and the price tag may drop as the potential upside fades. A deal for Vodafone could cost $150 billion, according to New Street Research.
Sentiment: Strong Buy
This morning, the giant telco repeated a warning it first made late last week: That the window for a wireless deal in Europe may be closing. The company has been open about its interest in Europe, and people familiar with the matter say it has explored a bid for Vodafone. Reading between the lines, it appears AT&T may be angling to bring Vodafone to the table and condition its expectations about price. Vodafone’s investors seem to have understood the signal. Since last Thursday, when AT&T Chief Executive Randall Stephenson first sounded the warning that the “window may be closing,” Vodafone’s shares have fallen 7%. AT&T CFO John Stephens repeated the warning today – with added punctuation. “We still believe,” he said, referring to the case for investing in Europe. “But I think it’s important to note that things have changed.” Vodafone has been seen as a takeover target ever since CEO Vittorio Colao agreed to sell the company’s 45% stake in Wireless to Verizon for $130 billion, a deal that closed last month. It’s now caught between being a possible seller and having to invest to build its own business. Last week, a person familiar with the matter said Vodafone would conduct accelerated due diligence that could lead to a bid for Spanish cable operator Ono. Last month,
Sentiment: Strong Buy
Over the past two days I bought half my position at an average price of $37.755. I would have liked to sell puts instead, but there is just little liquidity April and beyond.
Takeover Time? AT&T Winks at Vodafone, Then Winks Harder
A wink is as good as a nod to a blind horse. That drunk'en sailor wouldn't know a wink if it jacked slapped him. VOD better sober up fast and T needs to down a case-it's the blind trying to lead the blind! Hamtime99
Sentiment: Strong Sell