Looks like everyone likes the deal, some good comments in this article:
Global Crossing to Acquire C&W Unit for $885 Million (Update4)
Bloomberg News
April 26, 1999, 9:04 a.m. PT
Global Crossing to Acquire C&W Unit for $885 Million (Update4)
(Adds investor comment in 4th paragraph. Updates shares.)
Hamilton, Bermuda, April 26 (Bloomberg) -- Global Crossing
Ltd., which is building a global phone network, agreed to buy a
Cable & Wireless Plc unit that maintains underwater cables for
550 million pounds ($885 million) in cash and assumed debt.
Global Crossing said it will pay $725 million in cash and
assume $160 million in debt for the unit, called Global Marine.
The company, which is building undersea links between North
America, Europe, Asia and Latin America, plans to use bank loans
and cash on hand to finance the acquisition.
Hamilton, Bermuda-based Global Crossing will use the cable
installation and maintenance business to service its own network,
while continuing to provide services to the unit's existing
customers, including MCI WorldCom Inc. and Deutsche Telekom AG.
The purchase comes just a month after Global Crossing agreed to
buy No. 5 U.S. long-distance phone company Frontier Corp. for
$12.5 billion in stock and assumed debt.
''It makes a lot of sense from a financial perspective,''
said Stephen Parlett,'' an analyst at Montgomery Asset Management
Inc., which owns about 409,000 Global Crossing shares. ''They'll
save what they would have paid someone else for these services.''
Cable & Wireless's shares rose 67 pence to 909 pence. Global
Crossing rose 3 5/8 to 56 1/2 in midday trading. The stock has
more than doubled so far this year.
$100 Mln in Savings
The purchase means Global Crossing now won't have to pay
third parties the estimated $80 million to $100 million that it
expects to spend annually on servicing its undersea networks,
said Bill Carter, who will oversee the division. It estimated the
purchase would generate almost $100 million in cash flow --
earnings before interest, taxes, depreciation and amortization --
during the current fiscal year.
Analysts and investors use cash flow to analyze the
performance of indebted companies such as Global Crossing because
it focuses on how the underlying businesses are doing.
Increasing demand for Internet and multimedia services is
causing ''rapid growth in the $10 billion market for undersea
cable deployment,'' Global Crossing said.
Global Crossing sells time on its network and services to
other phone companies.
The Cable & Wireless unit is the world's largest undersea
cable installation and maintenance company, with a fleet of 13
cable ships, 21 submersible vehicles and 1,200 employees. Global
Marine, which grew out of the company that laid the first
telegraph cable between England and France in 1850, services more
than 35 percent of the world's undersea phone cables.
''The Global Marine division will have the capability to
handle Global Crossing's needs as it continues to serve its
existing customer base,'' said Carter.
Cable & Wireless
Cable & Wireless, the No. 2 U.K. telephone company, will get
cash to fund acquisitions around the globe, including its bid to
buy International Digital Communications Inc. in Japan.
Cable & Wireless said on Tuesday it would raise its bid for
IDC, a global long-distance phone carrier affiliated with Toyota
Motor Corp. The company is looking to expand its reach around the
globe to compete with AT&T Corp., British Telecommunications Plc,
MCI WorldCom and others to provide voice and data services to
multinational corporations.
Graham Wallace, C&W chief executive since February, is
trying to focus the company on high-speed data and Internet
services. In addition to its bid for IDC, the London-based
company is investing $670 million on a U.S. high-speed network
and trying to buy AAPT Ltd., Australia's No. 3 phone company.
At the same time, C&W is looking to sell its stake in One 2
One, Britain's fourth-biggest cellular phone company, and its
U.K. cable-TV unit, Cable & Wireless Communications Plc, is in
talks about selling some assets to rival Telewest Communications
Plc. C&W is also trying to sell its 20 percent stake in France's
Bouygues Telecom, France's No. 3 cellular company.
For C&W, the sale of Global Marine ''is part of a program to
dispose of non-core assets,'' said Paul Sharma, an analyst at
Investec Henderson Crosthwaite in London. ''The reason why people
are pleased to see this is because Cable & Wireless does trade
well below the sum of the parts.''
The acquisition, which Global Crossing expects to complete
within 60 days, is subject to regulatory approval.
Global Crossing was advised by Chase Securities Inc. and
attorneys Simpson Thatcher & Bartlett. |
