London -- Telewest Communications plc said last week it was
in "advanced talks" with Generale des Eaux of France to acquire General Cable,
Britain's fourth-biggest multiple system operator, for $1 billion in cash and stock.
That bid topped a reported NTL U.K. Group Inc. bid by
around $165 million. Specifically, the Telewest share-and-cash bid calls for Telewest to
pay 1.243 of its shares plus 65 pence ($1.07) in cash for each General Cable share. The
cash component is worth $400 million.
Generale des Eaux has set an April 15 deadline for this
part of the deal to be finalized in a formal and "irrevocable" bid. Telewest
intends to finance the purchase with a 259 million share issue, underwritten by its main
shareholders and priced at 92.5p ($1.52) a share. Initial comments from NTL CEO Barclay
Knapp seemed to suggest that his company has thrown in the towel, at least as far as
General Cable is concerned.
"We note with interest the announcement, and wish the
parties well," he said.
Stage two of the Telewest consolidation plan calls for it
to exercise its $336 million option to buy Comcast U.K. Cable Partners Ltd.'s 27.5
percent stake in Birmingham Cable and 50 percent stake in Cable London. That move would
effectively swipe both properties from under NTL's nose. NTL made a $600 million bid
for Comcast in February, predicated on also getting the two assets Telewest is now trying
to acquire.
But this part of the deal may yet unravel. NTL issued a
detailed statement insisting that Telewest cannot exercise that option to buy without an
independent valuation of the properties in order to ascertain "a fair market
price."
NTL also stated, "To date, there has been no formal
valuation of either property [and] the process leading to the purchase rights of Cable
London have not been triggered." There are still a number of complex negotiations to
be put in place and, according to one advisor, there is some "red tape to be sorted
out."
A bidding war for General Cable might break out if NTL
bounces back with an improved offer. But a more likely scenario would see NTL pursue
another consolidation target. There is not much left in the British market other than the
Comtel/Telecential MSO. Its Dutch owners, KPN/Vision Networks, have recently expressed
fresh enthusiasm to monetize part of their 100 percent stake, after taking the MSO off the
market last year.
Comtel/Telecential passes about 854,000 homes -- only
slightly less than NTL -- out of a total of 1.1 million homes in its franchise. Only
152,000 homes are connected, for a relatively low penetration rate of 17.8 percent. NTL
averages 35.9 percent penetration.
