UPC deal in limbo after Sunrise scraps EGM 

Sunrise’s CHF6.3 billion deal to acquire UPC Switzerland from Liberty Global hangs in the balance after the former announced it has cancelled a planned EGM on October 23.

The company had initially scheduled an EGM to approve the announced reduction in the size of the rights issue planned to finance its acquisition of UPC Switzerland. The telco was to reduce the size of the rights issue by CHF1.3 billion to CHF2.8 billion.

However, after Freenet – the largest shareholder in Sunrise – repeatedly said it would vote against the deal and proxy advisor ISS recommended shareholders do the same, Sunrise decided to scrap the meeting in order to avoid an embarrassing defeat. 

The company did not go so far as to cancelling the deal outright, with a statement from the operator saying that “the share purchase agreement remains in force and effect unless terminated by a party and has a long stop date of 27 February 2020.”

The statement continued: “Based on clear indications received from shareholders and Freenet’s announcement to vote against the capital increase at the EGM, the Board of Directors of Sunrise has concluded that the clear majority of shareholders who have registered their shares to vote at the EGM do not support the capital increase.”

In comments made to Digital TV Europe, a spokesperson from Freenet said: “The last few months have been an exhausting time for everyone involved. We accept the decision that the EGM was canceled but we are [still] not in favour. Now it’s important to sit down with all parties involved and to make successful companies even more successful in the future.”

Peter Kurer, chairman of the board of directors of Sunrise, said: “We regret cancelling the EGM. We have spent a significant amount of time engaging with our shareholders and continue to believe in the compelling strategic and financial rationale of the acquisition.”

Liberty Global has said it supports the cancellation of the EGM and that it is still keen on the deal. A statement from the company said: “The existing share purchase agreement between the parties will remain in place with some minor amendments, including the flexibility to convene a new EGM and certain adjusted termination rights. In addition, the commitments by Liberty Global in the recently announced Conditional Rights Purchase Agreement will lapse and thereby terminate.”

The Virgin Media-owner had previously announced an agreement to support the Sunrise rights offering up to an aggregate amount of CHF500 million. This would be achieved through the purchase of tradeable subscription rights at market prices and the subsequent purchase of newly issued shares, if any, in the rights offering.

The proposed offering would have also seen Liberty Global’s resulting ownership reach 7.8% at current market prices. In addition, the agreement would have seen Liberty Global receive one board seat nomination as long as its shareholding exceeds 5%.

While both parties are both in favour of the deal taking place, this latest development makes a deal less likely with those opposed to the deal not likely to change their position, suggest analysts at IHS Markit.

Speaking to Digital TV Europe, Max Signorelli, research analyst, media and entertainment at IHS Markit said: “It’s a notable delay for the deal which has already seen a number of concessions from both Sunrise and Liberty Global, namely the capital increase reduction from CHF4.1 billion to CHF2.8 billion and Liberty’s proposed CHF500 million participation. Sunrise’s major shareholder Freenet has publicly opposed the deal since its initial announcement but the cancelling of EGM is proof that many other shareholders also oppose the deal in this form, even under the new terms. It’s not clear how much more ground the purchasing pair can (or are willing to) give but if they are unable to agree on anything else, Freenet and the other’s opposition will continue indefinitely.


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