Hong Kong firm eyes Cable & Wireless

Shares in Cable & Wireless jumped 10 per cent yesterday after Hong Kong's PCCW confirmed it had approached the troubled telecoms group with a view to making a £2bn-plus bid.

PCCW wrote to C&W on 31 December "indicating an interest in engaging in discussions" about a possible takeover. But that approach was rebuffed by the recently appointed chairman, Richard Lapthorne.

"The gist of it was that they [PCCW] were quite interested in starting talks about talks," said one source, adding: "He [Richard Lapthorne] looked at it and thought talking about talking was a waste of time."

Still, another source insisted that the approach from PCCW had been serious and that the company was likely to come back with a fresh approach. "An awful lot of work was done on this prior to the letter being sent," said that source, adding: "This isn't going to go away."

Shares in C&W closed up 5.75p at 63.5p last night despite initial confusion over PCCW's intentions. Early yesterday PCCW issued a statement denying it was in talks with C&W but clarified later that it had made an approach.

It went on to say that "in the circumstances", it would "continue to monitor developments in relation to C&W". Furthermore, it said it would not go down the path of making another approach unless "it was offered a reasonable opportunity to undertake appropriate due diligence" on C&W.

C&W has not given PCCW access to its books because it does not believe that the offer is serious enough.

It is thought that PCCW had planned to make an offer of around 100p a share together with the venture capital house Texas Pacific Group, backed by a consortium of three banks.

Had an approach been successful, PCCW would have managed C&W's regional businesses while TPG would have run the troubled data operations in the US.

Shares in C&W have collapsed from their high of nearly £15 in March 2000 in the wake of four profit warnings and the emergence of a potential £1.5bn tax liability.