Cable & Wireless (C&W) has overcome a last-minute intervention from rival telecoms firm Thus and won control of Energis.
C&W announced on Tuesday morning that its offer of £674m for Energis had been accepted by Chelys, the parent firm of Energis. C&W says it expects that the new company will be able to achieve savings of £55m in the next year, rising to £80m by 2008.
The deal could be bad news for some workers, though, with C&W warning that it expects to cut 700 jobs over the next three years by combining the two businesses.
Energis chairman Archie Norman can look forward to sharing a bonus of £30m, according to reports. Norman was installed three years ago as chairman by the banks that rescued Energis from collapse.
Francesco Caio, C&W's chief executive, said that the takeover would help his firm offer next-generation telecoms services to businesses and compete better with BT.
"Importantly, it will create a stronger player with the scale needed to succeed in the increasingly competitive telecoms industry. The timing of this acquisition allows us to exploit the rapid growth in demand for IP-based services and the opportunities presented by the creation of a regulatory framework designed to facilitate infrastructure-based competition," said Caio in a statement.
Industry analysts believe that the UK telecoms market needs to consolidate, as it gears up to invest in new networks. BT is committed to building its 21st Century Network, which will support a wide range of IP-based services, and its rivals are under pressure to make similar moves.
Yesterday, Thus attemped to snatch Energis from under C&W's nose with an £800m offer, which was rejected by Chelys.