According to a report in the Financial Times, PCCW sent C&W a letter offering up to 100 pence ($1.63) a share, at a time when the UK telecom operator’s shares were trading at roughly 46 pence ($0.75). C&W’s new chairman, Richard Lapthorne, rebuffed the offer.

Following the disclosure, PCCW initially denied that it had made an offer for C&W in a statement to the Hong Kong Stock Exchange. The company would like to confirm that it did not make a takeover offer to Cable & Wireless, PCCW’s company secretary, Fiona Nott, said in the statement. While this was technically correct, it was misleading as it had in fact made a tentative approach to the company. PCCW was later forced to issue a retraction in London.

The Hong Kong Stock Exchange then issued a thinly veiled warning that all companies must abide by the rules and ensure they do not release misleading, false, or deceptive information, and not omit anything likely to affect the import of such statement or information.

Meanwhile, C&W is now facing questions from shareholders, led by Morley Fund Management, over why it rebuffed the offer, and one investor has called on the company to issue a formal explanation. Other shareholders however have been more forgiving, realizing the speculative offer was not a firm bid for the company and would have consumed a lot of management time, especially when C&W’s chairman, Richard Lapthorne, had just joined the company.

If the acquisition does take place, C&W faces being dismembered. PCCW is mainly interested in C&W’s Regional division, especially its profitable Macau operation on the former Portuguese colony. C&W’s operations in the Caribbean and Panama would be of more interest to an American owner, and its loss-making web-hosting companies in the US would be likely to go to a turnaround specialist.

There still remain questions about the wisdom of the bid, especially as 1.5bn pounds ($2.45bn) of C&W’s remaining 2.4bn pound ($3.93bn) cash pile has had to be ring-fenced to cover a potential tax liability. This money has been placed in an escrow account, where it must wait for a number of years for a decision from UK tax collectors.

Source: Computerwire