German media company Freenet, a major shareholder in Sunrise, will vote against the Swiss telco’s proposed takeover of cable operator UPC Switzerland, arguing that the price was too high and the conditions unfavourable.
At the extraordinary general meeting later this year, Freenet will therefore reject Sunrise’s proposed capital increase of CHF4.1 billion (€3.8 billion) associated with the CHF6.3 billion (€5.8 billion) acquisition announced in February 2019.
With a shareholding of around a quarter of the shares, Freenet will not be able to block the acquisition on its own, but its strong opposition could attract the attention of other, smaller shareholders who could also turn down the transaction.
According to Freenet, the purchase price and implied valuation for UPC Switzerland is too high, in particular in light of the cable industry being under severe pressure and UPC Switzerland’s operational performance, adding that for a fair transaction for all Sunrise shareholders, the purchase price should be lowered.
Freenet also opposes the condition that potential synergies amounting to CHF1.3 billion are being paid to Liberty Global in advance, arguing that for a fair transaction for all Sunrise shareholders, Liberty Global should become a shareholder of the combined entity and receive a lower portion of the potential synergies. Further criticism focuses on the transaction, capital and debt structure of the proposed deal.
In a statement, Sunrise said that the company has taken note of the announcement by Freenet to vote against the rights issue related to the acquisition of UPC Switzerland, adding that Sunrise remains convinced that the acquisition creates a “stronger and more valuable Sunrise”, benefitting from a “compelling strategic rationale”.
Sunrise will provide an update on the acquisition of UPC Switzerland as part of its Q2 2019 results announcement on August 22, 2019.