Wall Street vulture fund in £9bn swoop for Vodafone's Japan arm

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The Independent Online

A secretive Wall Street vulture fund with ties to America's political elite is leading a £9bn bid for Vodafone's Japanese arm.

Cerberus Capital Management, a Wall Street powerhouse that includes former vice president Dan Quayle among its deal makers, has teamed up with Providence Equity Partners to launch the all-cash bid.

Vodafone's board received the offer in a letter yesterday, it is thought, and now has to decide whether to scrap talks with Japan's Softbank.

Other private equity houses are waiting in the wings, with rival bids from Kohlberg Kravis Roberts and Permira a distinct possibility.

The last-minute emergence of Cerberus is seen in the City as good news for the Vodafone chief executive Arun Sarin, who has been fighting a revolt from investors and battling some of his own board.

Robert Grindle, at Dresdner Kleinwort Wasserstein, said: "It is absolutely good news. The risk was that Softbank could have got cold feet. Having another bidder on board dramatically improves the chances of doing the deal at a good price."

Softbank, the internet giant led by the billionaire Masayoshi Son, thought its deal was settled, although it has faced doubts about financing.

Mr Son is unlikely to walk away from the fight as long as ratings agencies are persuaded that his offer will not affect Softbank's credit score.

Cerberus, named after the three-headed dog that guards the gates to hell in Greek mythology, is an extraordinary success story. Founded as a £5m fund in 1992 by Stephen Feinberg, it has built a reputation as a fearsome operator.

It is not clear whether Dan Quayle, the 44th US vice president, is involved in the Vodafone offer but he was hired for his business connections in Japan. Donald Rumsfeld, the US defence secretary, also has a stake in the fund.

Cerberus' headquarters are on Park Avenue in Manhattan. The extremely secretive firm, which does not have a website, refused to comment yesterday. It would not confirm which companies it owns or even how many people it employs.

Providence Equity Partners, which is based in Rhode Island, did not return calls.

Vodafone is now weighing up the risks of opening talks with the US bidders, nervous that Softbank could become angry. The talks with Softbank were at a very advanced stage.

Softbank's cash and shares offer has been valued at anywhere between £5bn and £8bn, money that shareholders were keen to see returned.

Vodafone's Japanese unit has turned into a disaster, leading to demands that Mr Sarin fix or sell the business.

Vodafone shares, which traded as high as 230p in 2001, recovered somewhat yesterday, up 3p at 130p, although one analyst said: "Until they are much higher than that you can't say that his [Sarin's] job is safe."

Vodafone said yesterday that it had met its target of 10 million customers using its third generation (3G) mobile phones by March.

Vague rumours of a private-equity bid for the entire company have circulated this week.