Prysmian Said to Consider Bidding for Rival General CableDaniele Lepido and Manuel Baigorri
Prysmian SpA, the world’s largest cable maker, is evaluating a bid for General Cable Corp. to help increase its market share in North America, according to people with knowledge of the matter.
The Milan-based company has held preliminary discussions with financial advisers about the U.S. rival, said the people, asking not to be identified because the deliberations are confidential. Prysmian has yet to make an approach, no talks are underway and it may still decide not to proceed with an offer, the people said.
A merger of the two companies, with revenue exceeding $13 billion together, would widen Prysmian’s lead over rivals including France’s Nexans SA, Germany’s Leoni AG and Fujikura Ltd. of Japan. Prysmian aims to be a “consolidator” in the cable industry, which remains “too fragmented,” Chief Financial Officer Pier Francesco Facchini said in an interview in September.
A spokesman for Prysmian said on Tuesday the company isn’t in talks with General Cable about any combination. As part of its strategy to grow through external means, Prysmian is constantly evaluating its opportunities, he said. A General Cable representative didn’t return phone calls and an e-mail seeking comment.
Prysmian rose 3 percent to 18.63 euros at 9:13 a.m. in Milan. Nexans added 3.2 percent to 33.73 euros in Paris. General Cable jumped 21 percent to close at $17.73 in New York on Tuesday. Including debt, the Highland Heights, Kentucky-based supplier has an enterprise value of $2.1 billion, data compiled by Bloomberg showed.
“A combination with General Cable makes sense,” Alberto Rolla, a London-based analyst for Hammer Partners SA, said in an interview. Prysmian would “boost its presence in the U.S. market where cable demand is really growing and where it may be convenient to relocate part of the production because of cheaper energy costs.”
Last year, General Cable made 43 percent of its revenue from North America, according to data compiled by Bloomberg. That region accounts for about 15 percent of Prysmian’s sales.
In the event of an offer, Nexans, Leoni or Fujikura will probably lack the financial wherewithal to make a counterbid, Rolla said.
If Prysmian proceeds with a bid, it will probably use a mixture of stock and cash, said one of the people. Prysmian may also use part of the proceeds from an 800 million-euro bond sale, approved last week by its board, to finance a deal, the person said.
Prysmian and General Cable have been in existence in one form or another for more than a century, and both manufacturers have used acquisitions to increase market shares. Prysmian became the largest cable maker after acquiring Dutch competitor Draka Holding NV in 2011.
Goldman Sachs Group Inc.’s private-equity funds bought the power-cable unit and telecommunications cable business from Pirelli & C. SpA in 2005 and then renamed it Prysmian.
In October, General Cable said it had started the search for a chief executive officer to succeed Gregory Kenny, who would become chairman.