BILL Allan, the head of Scottish telecommunications company Thus, still has not spoken publicly about the approach for the company he has headed for the past decade – but if a battle does begin, he is unlikely to go quietly.
A staunch defender of the company that was spun out of ScottishPower and briefly propelled by dotcom fervour into the FTSE 100 – before a spectacular fall – Allan has long taken a "just wait until I have the last laugh" approach.
Last month, when
he reported maiden operating profits, he repeated a claim that Scotland "will one day be as proud of Thus as it is of Royal Bank of Scotland" and that Thus would be "a very significant player in UK telecoms". But now it appears time is running out.
Last Wednesday after shares in Thus suddenly surged (something the UK Listings Authority will no doubt be interested in), Cable & Wireless was forced to confirm that it had approached the Glasgow company about buying it.
Without rejecting the approach, Thus issued a statement saying it believed that it has a strong future as an independent company and asked shareholders to take no action. So far they appear to have fallen into line. One "leading shareholder" told a Sunday newspaper that price was a sticking point for a deal (as if it ever would not be).
Another report claimed that C&W's approach was rejected by Thus, however both sides expect further activity.
The significance of the rejection is also questionable as C&W's approach did not constitute a formal price in takeover terms.
A period of quiet is now expected while C&W decides how badly it wants Thus, during which time Allan and the rest of the board need to decide how much they are willing to accept before opening Thus's books, or prepare an action plan if it is to reject the approach.
For Allan, it could be difficult to divorce himself from his own ambitions for Thus and his feelings for C&W.
Once head of its regional operations, he has since become an outspoken critic of C&W, making the prospect of being taken over by his former employers particularly galling.
Allan has hit headlines in the past, knocking C&W's strategy and execution, and is said to believe that his former employer is still going backwards.
Thus has pointed out that while its own EBITDA has grown every year, that since C&W bought Energis in 2005 (beating off a last-minute bid from Thus), combined EBITDA across its corporate telecoms business has fallen.
Supporters say that Allan's willingness to attack the larger rival springs from his frustration at what he sees as an attempt by C&W to marginalise Thus.
C&W has said in the past that Thus is "sub scale" – some analysts agree – and does not treat the company as a real rival.
By contrast to Allan's outspoken comments, C&W executive chairman John Pluthero is said to spend little time discussing Allan. But interested he is, demonstrated by the tentative approach, said to be in the region of 150p-160p a share.
Thus may be a victim of its success, winning a string of new contracts with the Scottish Government and high street retailers in recent months, when rivals have been issuing profits warnings.
It is these customers which C&W is believed to be keen to get its hands on as it strives to gain the scale to compete with former state monopoly BT.
Thus's growth also comes at a time when analysts are calling for consolidation, with the number of players in corporate telecommunications leading to a price war which means most companies – including C&W and Thus – are unable to generate sustained positive cash flow.
Allan himself said at last month's results that the sector would "benefit from consolidation", which would bring "rational pricing".
Sources claim the meeting between the two company chairmen was quite amicable, and it could be that Philip Rogerson saw the writing on the wall: if C&W, or anyone else, is willing to pay up, there is little the smallcap can do but roll over.
Apparently early contact with shareholders has shown support for Thus' response to the approach.
However, with shares in Thus opening last week at 115.25p, about 30 per cent lower than they were three years ago, the support may be that, by not immediately engaging in talks it is possible other bidders may be flushed out, and the value of Thus may rise.
One major plus for Allan is that because of the well-known eagerness of the market for M&A in the sector, he will have spent plenty of time thinking about what to do when the rivals do start knocking.
So far the approach has been to wait and see, but if experience is anything to go by, Allan will have plenty more to say before the battle finishes.
BACKGROUNDWHEN Thus, which provides hi-tech telecommunications services to corporate clients, was demerged from ScottishPower in 1998 and listed on the London Stock Exchange, the market was caught up in technology-driven hopes that sent it briefly into the FTSE 100, with a market capitalisation of over £2 billion.
But despite the early hopes, the company has never paid a dividend and is expected to reach profitability at the end of the current financial year for the first time.
The problems of Thus are similar to those elsewhere in the sector – Cable & Wireless's own corporate telecoms business lost cash in the current year. This is partly due to the large capital expenditure required to carry out bigger products, but also to the competitiveness of the market, which keeps prices down.
Analysts have long expected a wave of consolidation to take place. , Thus chief executive Bill Allan has often talked of the company as predator not prey, but most analysts say a deal, in one form or another, is likely to see the company sold.
The full article contains 1008 words and appears in The Scotsman newspaper.
