British telecoms operator Cable & Wireless is in early talks to buy privately owned rival Energis in a deal tipped to be worth about 700 million pounds ($1.22 billion), sources familiar the situation said on Monday. However, negotiations are at an exploratory stage and it is too early to say they are likely to lead to a deal, the sources added.
Cable and Wireless, Britain's second-largest fixed-line operator, is expected to use its part of its 1.34 billion pounds ($2.34 billion) in cash to help finance any deal, which analysts say will need to reward Energis's management who were appointed to rescue the group in 2002 when it was taken private.
News of the talks helped push up shares in Cable and Wireless 3.3 percent to 149 pence by 0952 GMT as investors welcomed news of consolidation in Britain's fragmented telecoms market ahead of much-needed investment in new networks. C&W, whose 133-year-old empire once spanned Europe, Hong Kong and the United States, has long been tipped as both a bid target and a predator in the UK, partly because of its cash pile.
The company rejected take-over overtures from Hong Kong carrier PCCW in February 2003 - just days after Richard Lapthorne was appointed chairman to revive the fortunes of a group whose shares were languishing near record lows.
With the market facing overcapacity and crashing prices, Cable and Wireless launched a radical overhaul, pulling out of loss-making businesses in the United States and Japan and cutting thousands of jobs. It returned to net profit last year.
Cable and Wireless, which has long been backed by long-term advisor J.P. Morgan, declined to comment. Energis, which is being advised by NM Rothschild, also declined to comment.