James Moore: Vodafone's play for CWW might help cheer up investors

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The Independent Online

If the mythical King Midas (right) ever needed a cure for his affliction he might find it by joining the board of Cable & Wireless Worldwide (CWW).

The whole shebang seems to have been unravelling for as long as anyone can remember while performing reverse alchemy for its investors. Small wonder that investors are quietly cheering the news that Vodafone might be prepared to put them out of their misery. The City was happy, too, hoping that this, following hot on the heels of the Glencore-Xstrata deal, heralds a revival in M&A activity.

There is even something in it for corporate governance campaigners. Because such a deal is small potatoes for a company the size of Vodafone, the job of integrating and making a success of CWW will very likely be handled by someone below board level.

They'll no doubt be handsomely remunerated, but maybe not to the level of the £10m that CWW lavished on its former boss, John Pluthero, for supposedly leading a turnaround that never quite materialised. This will help to fuel the argument against such payments.

In fact the only question that really needs to be asked is, well, what's in it for Vodafone?

There are some nice undersea cables and some interesting bits and bobs that help with business-to-business and internet services which could all prove useful.

They come quite cheap and the £700m or so in cash that Vodafone is said to be considering paying is small change to such a giant.

But it is still £700m, which is quite a lot to shell out for some interesting odds and ends that Vodafone could happily live without. There is also, though, the small matter of the tax implications.

Vodafone loves tax, or more properly, the lack of it. And CWW comes with some very attractive tax assets, which Barclays Capital thinks could be worth as much as £400m to Vodafone. That puts a whole new light on the package.

Others are more sceptical about the prospect of Voders realising anything from the capital allowances and other tax losses on CWW's balance sheet. The change of control complicates matters, not to mention the impact of changing the way a business operates.

However, the tax experts I spoke to yesterday said that when it came to big corporates and HM Revenue & Customs, it was remarkable how easily deals got done. So perhaps it's time for Vodafone to book those tables at The Ivy.