Tom O'Sullivan unravels one of the most complex transactions in UK corporate history, the breaking up and selling off of Cable & Wireless Communications to US cable group NTLThe Timescale
Graham Wallace appointed as Cable & Wireless chief executive.
Wallace opens internal talks about selling off some of the group's
interests including the residential cable stake in Cable & Wireless
The auction starts here.
Linklaters briefs CWC on the proposed deal with Telewest.
Mounting speculation forces CWC to announce it is discussing a deal to
sell its consumer cable interests to rival Telewest.
US cable group NTL gets the secret go-ahead from Cable & Wireless to open
NTL's US general counsel Richard Lubasch arrives in the UK to oversee the
legal aspects of the deal. He starts by briefing the senior partners at
Travers Smith Braithwaite.
Talks between NTL and Cable & Wireless over buying CWC are revealed by the
Graham Wallace rules out a three-way merger between CWC, NTL and Telewest.
France Telecom, advised by Norton Rose, invests $1bn (u600m) in NTL giving
it the finances to pursue CWC.
The deal means that a further $4.5bn (u2.9bn) will be available to NTL
upon completion of the deal which will give France Telecom a 24 per cent
stake in NTL.
Cable & Wireless signs a 21-month exclusivity agreement with NTL cutting
Telewest out of the picture. This means that there will no longer be an
The legal advisers are, for the first time, satisfied that “the deal is on”.
Intensive talks between all the parties at the offices of Allen & Overy.
Deal between NTL and Cable & Wireless signed at 9am.
The deal triggers the rest of France Telecom's u3.5bn investment in NTL.
Richard Lubasch flies back to the US.
Depending on who you speak to there were either 100, 75 or 50 lawyers
occupying either “half of the meeting rooms” or “every room on every floor”
for either 24 or 48 hours.
Whatever the precise figures, it is fair to say that the City offices of
Allen & Overy were crammed with lawyers last Sunday, and not just its own.
A meeting which began at 10am that morning did not end until 9am the
following day, with the signing of a transaction document breaking up and
selling off the u15bn Cable & Wireless Communications (CWC) in two parts.
The signing-in book was a Who's Who of merger specialists ranging from
Travers Smith Braithwaite to Linklaters, Slaughter and May, Clifford
Chance, Norton Rose and the US firm Skadden Arps Slate Meagher & Flom,
representing clients ranging from US cable group NTL to CWC and France
All were involved at different stages in the three segments of the deal,
which broadly fell into the separation of the two businesses, the future
“inter-connect” arrangements between companies and the transaction itself.
At the centre of all this activity was Allen & Overy's 30-strong team
representing Cable & Wireless, which was in the unusual position of being
both seller and buyer. Ironically, the law firm first worked with Cable &
Wireless three years ago when it created CWC. So it was perhaps appropriate
that it should also be in at its death. The business division DataCo was
sold to its parent, Cable & Wireless for u6.5bn. The residential business
ConsumerCo went to NTL for a further u8.2bn.
In effect, the two elements of CWC had to be separated before any deal to
sell them could be entertained. The problem was that it all had to happen
“It was probably the most complicated deal that most of those present had
ever been involved in,” says Allen & Overy corporate partner Helen
Harrison-Hall, the person responsible for making sure the transaction
document was in the right place at the right time to allow the announcement
of the deal.
But there was one obvious absentee in all of these meetings. In April CWC
announced that it had opened talks with rival cable group Telewest and its
advisers, which included Freshfields, about an u8bn deal whereby Cable &
Wireless could achieve its aim of pulling out of the residential cable
market. The marriage of CWC's residential cable interests and Telewest
seemed like a done deal.
But behind the scenes NTL (codenamed Nickel during the talks) was making
confidential approaches to Cable & Wireless, CWC and France Telecom, whose
financial clout and initial $1bn investment NTL needed to buy into CWC as
soon as the deal was made public.
When Telewest's bid was not rejected NTL started to make more concrete
“As soon as Cable & Wireless made its strategic decision [to get out of
the residential cable market] it was clear that Telewest, as well as NTL,
were the most obvious parties to do a deal,” says one Telewest source. “But
neither Telewest nor NTL were in a position to do the deal off their own
balance sheet. NTL got u3.5bn of new equity from France Telecom and
Telewest didn't. End of deal.”
It is partially true that it became an auction and that extra financial
backing was the key. But the catalyst for just over four weeks of frenetic
activity, leading to last Monday's deal, was the arrival in London of NTL
executive vice president and general counsel Richard Lubasch along with
other NTL executives.
NTL has a team of 20 lawyers in the UK, which is its biggest market. They
handle commercial matters such as programming and licensing plus compliance
issues on training and tax. But its New York headquarters is the strategic
centre and that is where the impetus for the deal came from.
Having held transatlantic conversations with Cable & Wireless, CWC and
France Telecom, Lubasch had lots of leads but nothing definite when he
arrived in London on 23 June. Within three weeks he had France Telecom's
staggered investment secured and a 21-month exclusivity agreement with
Cable & Wireless which provided a legal block on Cable & Wireless striking
an alternative deal for CWC's residential interests with anybody else, and
left Telewest out in the cold.
“We were doing each deal simultaneously because we were later into the
game than some others we had to catch up,” says Lubasch. “It was a staged
process and along with starting the due diligence we were also handling
elements of the France Telecom transaction while at the same time opening
talks with Cable & Wireless.
“The biggest reason for any lack of sleep was having to analyse and divide
a highly technical company (CWC) into two parts – we had to ensure that it
would work on a legal and commercial basis.”
Working with his NTL UK counterpart Robert MacKenzie, Lubasch's first step
was to bring Spencer Summerfield, corporate partner at Travers Smith
Braithwaite, and other members of the firm's legal team up to date with the
proposed takeover of CWC ConsumerCo.
Summerfield, who works almost exclusively on NTL business, refuses to say
when he first became aware of the deal. But it seems certain that he will
have been on alert since Cable & Wireless made known its desire to sell,
and certainly in a state of high alert since April.
All sides agree that the turning point in the deal was the signing of the
21-month exclusivity agreement between NTL, CWC and Cable & Wireless on 19
July after an all-night session. “Until that point” says Lubasch, “it was
still pretty much an auction.”
Summerfield describes the agreement as “pivotal”. A source at Telewest,
which found out the night before the exclusivity agreement was signed,