Cable & Wireless appeared to have clinched its takeover of Energis on Monday night, in spite of a last-minute attempt by rival Thus to scupper the deal.
Thus the Glasgow-based telecommunications carrier that was demerged from Scottish Power in 1999 launched a last-ditch £800m counter-offer for its much larger rival in what seemed to be an opportunistic attempt to exploit the reluctance of some Energis bondholders to back C&W's recommended bid.
Ten hedge funds, which own a large chunk of Energis' junior debt, had threatened to block C&W's offer, which valued Energis at up to £835m, if it was not increased. C&W refused and at the end of last week gave the funds until 5pm on Monday to sign up to the deal.
After C&W had announced the deadline, Thus and its advisers decided over the weekend to launch a public counter-bid, even though it had already been rejected by the Energis board in late July.
The bidding process was less transparent than a battle between publicly quoted groups would have been. Energis is a privately owned company, which is controlled by a group of banks and financial institutions.
But after a hastily-arranged meeting between Thus and Close Brothers, the investment bank co-ordinating the hedge funds' attempt to squeeze a higher bid from C&W, the reluctant bond-holders chose to sign up to the original offer.
A deal would allow C&W, the second largest network operator in the UK, to narrow the gap with BT, its much larger rival.
Energis had focused solely on the corporate market, part of the recovery strategy put in place by the management team led by John Pluthero, chief executive, when he took over in 2002.
Bill Allan, chief executive of Thus, had spoken earlier in the day of “very significant operational synergies” from a link-up with Energis. But analysts pointed out that C&W's bigger scale would always have put it in a better position to find savings.
The deal is the first step towards long-expected consolidation in a sector plagued by overcapacity. Call prices are under severe pressure because of intense competition and the impact of new technology.
The emergence of Thus as a late bidder surprised industry analysts, who had seen the much smaller company as a bid target rather than a predator. Some questioned the Thus strategy of attempting to pull off an audacious bid at the last minute.
Thus shares were suspended on Monday just before the bid was announced. Under UK listing rules, the approach was deemed a reverse takeover because of Energis' size. At its current share price, Thus has a market capitalisation of just over £200m.
Additional reporting by James Drummond