FRAMINGHAM (12/08/2003) - Cable & Wireless on Monday announced plans to sell its U.S. business to Gores Technology Group LLC, culminating a market exit than began in June.
C&W says that it will file for Chapter 11 bankruptcy protection as part of the deal that calls for Gores Technology Group to acquire substantially all of C&W America's assets for US$125 million. Gores is an investment firm that specializes in acquiring distressed technology assets. The deal is subject to bankruptcy court approval and the purchase price depends on business performance targets that C&W must meet, says John Dubel, CEO of Cable & Wireless America.
The deal is expected to be finalized by the end of February, he says.
Dubel recently joined C&W as CEO of the U.S. business to help lead the service provider through the financial restructuring. Dubel, a principal of corporate restructuring firm AlixPartners LLC, has guided companies such as WorldCom Inc. through financial realignment.
"This is positive news for our customers because it provides clarity and allows us to continue to serve our customers in the Web hosting and transport areas," he says.
At least one C&W Web hosting customer says he is encouraged by the news. Analysts had expected a buyout to take much longer.
"I have been pleased with the performance of C&W since this planned action first surfaced," says Phil Gibson, vice president of Web business and sales automation at National Semiconductor Corp. in Santa Clara. "Their service levels and actual measured performance has continued to improve. This is especially the case in Asia where I have
seen significantly better performance over the last nine months than was previously the case."
C&W America's deal with Gores Technology comes six months after the U.K. telecommunications firm said that it planned to scrap its unprofitable U.S. business. Executives have said the service provider was losing about $1 million per day in the U.S. market.
C&W began its exodus from the U.S. in the fall of last year, when it announced it was selling its voice service business to Primus Telecommunications Group.
Then in June, the company announced a complete exodus from the U.S., leaving some 5,000 domestic customers wondering what would happen to their services as C&W executives reviewed options for disengaging the unprofitable business.
Dubel says customers should not see any service interruptions during the transition period. He notes that C&W America has received a commitment for as much as $100 million in debtor-in-possession financing from C&W to help maintain U.S. operations during the sale.