Draka keeps Prysmian option as Xinmao talks heat up

By Greg Roumeliotis and Antonella Ciancio

AMSTERDAM/MILAN (BestGrowthStock) – Dutch cable-maker Draka

is forging ahead with plans for an agreed takeover by larger Italian peer Prysmian as talks with China’s Xinmao Group about a higher offer heat up.

Draka will give its shareholders an opportunity to have their say on Prysmian’s 829 million euro ($1.12 billion) cash and share offer at a meeting scheduled for late January.

That assumes that the cable group has not done a deal with Xinmao in the meantime. Draka said talks with the Chinese group and its advisers were continuing, but at this stage there was no certainty that a transaction would be agreed.

A Xinmao spokeswoman said its chairman Du Kerong was now in the Netherlands for talks, but could not say how long he would stay there.

Draka shares were flat at 19.14 euros at 0928 GMT, while Prysmian shares were down 0.3 percent. Prysmian’s bid currently values Draka at 17.02 euros per share while Xinmao’s cash bid values it at 20.5 euros per share.

“The EGM is something procedural, people were expecting it. The focus is on Xinmao and its update, everybody is waiting for that,” ABN AMRO analyst Maarten Bakker said.

Xinmao is due to announce by December 20 whether it will proceed with its 1 billion euro bid. The group has said bank financing for its takeover is conditional on it reaching a final agreement on a merger protocol with Draka.

Prysmian said it would hold its own shareholder meeting on January 21, 22 and 24, with the launch of its offer expected in early January. It will ask shareholders to approve a share increase to be able to back the share element of its bid.

The cash consideration for its offer, some 420 million euros, will come from Prysmian’s balance sheet and committed credit facilities, Prysmian said.

Prysmian has already won the backing of Draka’s management for its offer and has secured the key support of cornerstone shareholder Flint Beheer, which has a 48.5 percent stake in Draka.

In its statement on Wednesday, Prysmian said it would submit its draft bid to the Dutch stock market regulator AFM later in the day and that it had taken all necessary measures to secure financing for its offer.

Draka is a market leader in telecommunication and data communications wires. A leading position in optical fiber — No.1 in China and Europe, and No.4 in the United States — prompted Xinmao to gatecrash Draka’s deal with Prysmian.

As investors await Draka’s decision on Xinmao, some European politicians have raised concerns about the prospect of China, which has huge currency reserves and where many companies have huge cash piles, snapping up Europe’s industrial crown jewels.

European Union industry chief Antonio Tajani has voiced concern that Xinmao’s bid to buy Draka may give China access to vital know-how to the detriment of Europe. Italy’s and France’s ministers for industry have also expressed fears.

(Additional reporting by Terril Jones in Beijing; Editing by Sara Webb and Alexander Smith)

Draka keeps Prysmian option as Xinmao talks heat up