C&W bid talk sees shares in Thus soar

Shares in Thus yesterday leapt almost 26% after news broke that Cable & Wireless was back at the gates of the Glasgow-based alternative telecoms group and was poised to launch an audacious takeover move on the smaller Scottish rival.

C&W, the UK's second-biggest corporate telecoms operator after BT, confirmed to the City that it had made the preliminary approach after a sudden spike in Glasgow-based Thus's share price.

However, C&W said in a statement: "This announcement does not amount to a firm intention to make an offer and accordingly there can be no certainty that an offer will be made."

A C&W spokesman yesterday declined to comment on the level of offer - but the approach is rumoured to be pitched at 150p a share, valuing Thus at around £275m.

If an offer for Thus did emerge, it would mark C&W's biggest takeover since it acquired Energis in 2005.

At the time, Thus - run by former C&W executive Bill Allan - made a clear attempt to trump the takeover with a counter approach to Energis, but failed.

There were also persistant rumours just before the Energis acquisition that C&W had been stalking Thus.

Allan yesterday did not return calls for comment.

Nonetheless, the latest news may be regarded with some relief by many of Thus's long-suffering shareholders.

Thus, which is a widely-held stock north of the border as a result of its 1999 demerger from ScottishPower, has seen its share price tumble helplessly from dizzy heights of £80 - when it was catapulted, briefly, into the FTSE 100 during the dot.com boom, before it was forced into a 10 for one consolidation of its shares.

The company was among the most spectacular boom-then-bust stocks of the dot.com era. At its peak in March 2000, it was valued at around £1.5bn.

Thus, which owns Demon broadband, employs 1700 people, and also counts large businesses and public sector bodies as clients, Shares yesterday closed up 28.5p to a six month high of 140p, giving Thus a market capitalisation of around £250m.

Thus shares had nearly halved in the past year until their recent surge.

In response to the C&W approach, Thus yesterday urged its shareholders to "take no action at this time", claiming it was confident in its future as an independent group.

"The board remains focused on delivering maximum value for shareholders and will evaluate any proposal from any third party against the value that the company can deliver as an independent group," the company said.

At the same time, C&W shareholders were unimpressed with the approach and sent the telcom's shares down 4.5p, to 158.75p.

Mark James, an analyst at brokers Collins Stewart, said: "Initial reaction is this is negative for the C&W equity story. We're not sure if this is quite what C&W shareholders expected by value realisation.

"Expectations for C&W, by and large, are for demerger of UK and international arms and/or the return of cash to shareholders and the sale of various international assets.

"We're not sure that a bid for £250m market cap Thus is quite what was anticipated."

Nonetheless, after a run of profit warnings, Thus has recently shown signs of recovery, making it an obvious target for C&W.

Thus last week posted its first operating profits for the year to the end of March, with a £4m surplus, compared with an £11.1m loss previously.

It also reported that annual pre-tax losses had narrowed from £15m to £2.8m as the company predicted that it would turn its first ever profit this year.

John Pluthero, C&W's executive chairman, has long held that the company is best-placed to mop up the persistant overcapacity in the splintered telecoms sector that has been plagued by cut-throat competition and falling prices.

C&W last week reportedly said that it was eyeing UK acquisitions, as well as a move to possibly split its UK and international operations. It is thought that a merger with another operator could make it easier to spin off the UK business.

Meanwhile, the telecoms industry is consolidating apace, with UK carrier Vanco snapped up by India's Reliance Communications earlier this week.

C&W, which has a history dating back to the 1860s and at one time once provided communications services for the British Empire, split itself into two parts in 2006, separating Europe, Asia and US from its operations in the rest of the world.