Communication break down

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

22 February

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

Communications (CWC).

The auction starts here.


Linklaters briefs CWC on the proposed deal with Telewest.

11 April

Mounting speculation forces CWC to announce it is discussing a deal to

sell its consumer cable interests to rival Telewest.

23 June

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.

11 July

Talks between NTL and Cable & Wireless over buying CWC are revealed by the


13 July

Graham Wallace rules out a three-way merger between CWC, NTL and Telewest.

15 July

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.

19 July

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”.

24-25 July

Intensive talks between all the parties at the offices of Allen & Overy.

26 July

Deal between NTL and Cable & Wireless signed at 9am.

The deal triggers the rest of France Telecom's u3.5bn investment in NTL.

27 July

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,