Following shareholder pushback, Swiss telecom operator Sunrise has cancelled the purchase contract for the cable network operator UPC, officially burying the controversial deal. This is another failed attempt to challenge industry leader Swisscom.
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“Yesterday evening we cancelled the purchase agreement,” Sunrise CEO Olaf Swantee said on Wednesday. “The deal proposed by management to our shareholders is dead. It no longer exists”.
In October, Sunrise abruptly put off a shareholder meeting after it became clear that the majority of Sunrise shareholders were not behind the capital increase to finance the CHF6.3 billion ($6.3 billion) acquisition of UPC, according to Swantee.
One key source of resistance was the CEO of the world’s largest cable network group Freenet, which holds around a quarter of the second-largest Swiss telecom provider. Freenet CEO Christoph Vilanek criticised the purchase price and argued the deal was detrimental to Sunrise shareholders.
Sunrise communications said on Wednesday that it faces a hit of up to CHF125 million from its failed bid. This includes a CHF50 million breakup fee and CHF19 million in underwriting fees and already-incurred integration costs of CHF24 million.
This represents another failed attempt to create a stronger challenger in the Swiss telecom market for Swisscom, the majority state-owned industry leader. Nine years ago, the Federal Competition Commission forbid a planned merger of Sunrise and French telecom operator Orange for competitive reasons. However, the antitrust authorities had no objections to the purchase of UPC by Sunrise.
UPC owner Liberty Global has left the door open for discussion in the future and in a statement, indicated that it hopes that a new deal for the Swiss cable operator can be reached. “We look forward to continuing our conversations with either the board or Freenet about a potential transaction that creates significant value for both sets of shareholders and Swiss consumers,” said Liberty CEO Mike Fries.
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