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Who Does Not Love A Late Twist?

04 February 2019 by lberuti

SUNCOM (Sunrise Communications) and Liberty Global have been holding on-off talks about merging their Swiss businesses for a while. Liberty’s management recently said that good progress were being made and that a turnaround of their swiss unit UPC was expected this year. That is probably one of the reasons analysts were assuming that an acquisition of Sunrise could create a scaled challenger and would make strategic sense but would not happen before 2020. To their surprise, an article published today suggested there could be a twist and that rather than offering an exit to SUNCOM’s shareholders, the saga could end with SUNCOM bidding for its domestic rival UPC. The rumours got a lukewarm reaction from the equity market – Sunrise’s stock lost 1.25% today – and sent SUNCOM’s 5-year risk premium through the roof – 75bps wider at 128bps - as investors were left considering the prospects of a company saddled with a dividend-sapping high leverage.