Bid looms as turmoil continues at C&W
Cable conflict: Acrimonious row over who runs telecoms group unresolved as threat grows of US takeover
Tuesday 21 November 1995
Cable & Wireless was last night bracing itself for an opportunistic takeover bid from Craig McCaw, the US mobile phone billionaire, as another day of boardroom turmoil failed to resolve the clash between the chairman, Lord Young of Graffham, and chief executive, James Ross.
Sources close to the company said last night that two board meetings had failed to end the stalemate over who runs the company. Win Bischoff, the deputy chairman, met executives yesterday morning, followed by an afternoon meeting of non-executives where both Lord Young and Mr Ross were questioned closely.
A statement from C&W is expected this morning.
It is understood that Mr McCaw is currently holding discussions with his bankers and has the financial muscle to mount an pounds 11.5bn hostile bid. C&W's shares closed up 3p to 420p, valuing the company at more than pounds 9bn.
C&W was plunged into chaos at the weekend after it emerged that Mr Ross had delivered a warning that he would go unless Lord Young was ousted or reduced to a lesser role.
According to one senior executive, the company's position is "unsustainable" and leaves C&W an obvious candidate for a bid. City analysts say that a successful suitor would have to pay at least pounds 11bn.
There has been speculation that Mr McCaw approached BT at one point to discuss a joint takeover of all or part of C&W, including the One 2 One mobile telephone operation jointly owned by C&W and US West. Mr McCaw founded McCaw Cellular, a dynamic mobile communications company, in which BT took a large stake before selling out to AT&T.
Analysts say that AT&T would also join any battle for control of the group. Another potential name in the frame is that of Nynex, the US telecommunications group with which Mr Ross is already believed to be negotiating some form of cooperation. One problem for any predator is that many of C&W's assets are in joint venture. Another is that the group's operations around the world are often licensed by national governments, who would have to approve transfer of control.
More immediately, the key to who wins the battle between Lord Young and Mr Ross is the backing of the non-executive directors, led by Mr Bischoff, chairman of Schroders. He and his colleagues were attempting last night to hammer out some solution following the meeting with the executive directors but excluding Mr Ross.
Lord Young was widely perceived as having the support of the non-executives following the announcement last Thursday that he would remain as executive chairman until his 65th birthday in February 1997. But the Ross camp is insistent he has been successful in wooing Ulrich Hartmann, a director of C&W's European partner, Veba, which has a 10.48 per cent stake in the group.
Institutional shareholders have become extremely angry at the public debacle. One said that both Lord Young and Mr Ross should go if credibility is to be restored but other City sources said that if one head rolls it should be Lord Young.
Should Mr Ross relinquish his post, the succession is far from clear. There is a view that the safest pair of hands would be those of Rod Olsen, the finance director, who has been with the group for a decade. Duncan Lewis, who in September shocked the industry by resigning as chief executive of C&W's Mercury Communications arm, could also be in the running. One source close to the company said Stephen Pettit, director for Europe, could take the top slot. Although he joined the board as recently as September, after coming to C&W in March 1994, he is said to be "on an extremely fast track".
One City analyst said: "Institutions want to see a new chairman who has a record of serving shareholders well and who would go about it in a straightforward way at C&W." Another said that both the chairman and chief executive have angered shareholders through "empire-building at the expense of short- term shareholder returns".
He added: "They have invested in disparate start-up operations all over the world ... The management has made decisions which are inappropriate and expensive."
Cable & Wireless has refused to comment, even going so far as to deny knowledge that yesterday's meetings were taking place. One insider said: "It's exciting - there is this big boardroom battle and we do not know who will win."
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