(Reuters) – Colt Group SA‘s largest shareholder, asset manager Fidelity, offered to take it private in a deal valuing the telecommunication service provider at about 1.72 billion pounds ($2.73 billion).
The 190 pence per share cash offer undervalued Colt, said the company’s independent directors on Friday. The offer represented a 21.3 percent premium to the stock’s Thursday close.
Shares in Colt, which runs fibre optic networks and data centres for companies, jumped as much as 23 percent to 192.91 pence on Friday morning, above Fidelity’s offer. But they were later trading at 190 pence.
A third party could potentially pay much more for Colt, the independent directors said. But a deal would not go through unless Fidelity changes its plan to hold on to its stake through next year.
Fidelity, one of the founding investors of Colt, said it would not increase its offer. The firm held 62.4 percent of Colt.
The offer has been accepted by Standard Life Investments and Ruffer LLP, who together held about 7.8 percent of Colt, Fidelity said.
“We have accepted Fidelity’s … offer as being the best available option in the circumstances,” a spokeswoman for Standard Life Investments said.
Other top shareholders where either unavailable to comment or declined comment.
“I would consider (the offer) redemption for long suffering Colt shareholders.” Andrew Darley of brokerage finnCap told Reuters.
Colt shares, Friday’s top percentage gainer on London’s FTSE-250 Midcap index, have fallen about 11 percent since listing in 2006. Reduction in call rates have hit the company’s voice services business, which bring in nearly a third of its revenue.
On its own, Colt will find it difficult to generate “meaningful cash flow” due to inferior economies of scale compared with competitors, J.P Morgan Cazenove analysts had said in February when the company announced results.
The firm is advising Fidelity while Colt is being advised by Barclays Bank.
M&A in the telecommunication market has been heating up since Britain’s BT Group Plc agreed to buy EE, the country’s biggest mobile operator, from Orange and Deutsche Telekom earlier this year.
Telecoms markets in France, Italy and the UK are ripe for further consolidation. In UK, converged products were in short supply, said analysts at EY. (bit.ly/1N8ODNo)
Ownership of networks was back in fashion, Darley said.
Colt’s independent directors made no recommendation to shareholders.