ZURICH (Reuters) - Liberty Global LBTYA.O has offered a 500 million Swiss franc ($501.45 million) sweetener to rescue the sale of its Swiss cable and TV business to Sunrise Communications SRCG.S but a key Sunrise shareholder said it remained opposed to the deal.

FILE PHOTO: The logos of Swiss telecom company Sunrise and broadband and telecommunications provider UPC Schweiz are seen at a shop in Zurich, Switzerland October 10, 2019. REUTERS/Arnd Wiegmann/File Photo

Some Sunrise investors say the 6.3 billion franc price tag for cable operator UPC is too expensive. They have opposed the Swiss telecoms group’s plan to raise 2.8 billion francs to fund the purchase and raised concerns that Liberty Global was not taking part in the deal.

Liberty Global, set up by U.S. cable pioneer John Malone, said on Monday it had offered to buy up to 500 million Swiss francs in newly created Sunrise shares SRCG.S as a way of easing through the capital hike needed to clinch the sale.

If fully utilised, Liberty Global’s ownership in Sunrise would reach 7.8% at current market prices, while Liberty Global will also receive one board seat as long as its shareholding exceeds 5%.

Sunrise shareholders will vote on the capital increase needed to complete the deal on Oct. 23, with a Reuters survey showing at least 30% of Sunrise shares, including German group Freenet FNTGn.DE, against the capital hike.

Freenet, which holds nearly a quarter of Sunrise’s shares, said on Monday it still opposed what would be Switzerland’s biggest telecoms deal, despite Liberty Global’s offer.

Shares of Sunrise gained 1.9% in early trading, before retreating to trade 0.4% higher after Freenet’s comments.

SIMPLE MAJORITY

Sunrise, which competes with state-controlled Swisscom SCMN.S, needs a simple majority to back the equity issue, which has been scaled back from 4.1 billion Swiss francs originally planned.

Proxy adviser ISS has recommended shareholders vote against the rights issue. Other proxy advisors Glass Lewis, Ethos, and zRating have recommended Sunrise shareowners approve the capital increase.

“We have always believed in the logic of this combination. It creates a national powerhouse that will provide a fully-converged challenger to Swisscom and represents a smart and accretive transaction for both Sunrise and Liberty shareholders,” said Mike Fries, CEO of Liberty Global.

Sunrise welcomed the Liberty Global’s offer, saying its financial contribution would lessen the commitment needed from Sunrise shareholders, while Liberty’s presence on the board would benefit the company.

“Liberty Global is a leading global cable operator and will bring considerable experience to our board to support management in running the combined business and delivering on our identified, actionable synergies,” said Sunrise chairman Peter Kurer.

Freenet said it remained of the opinion that the deal was not a good one.

“The participation of Liberty Global changes nothing in our opinion or that of the majority of shareholders about the deal,” the German telecoms company said.

“Liberty Global has merely said it will participate at rock bottom prices with the money they will receive from a too expensive sale.”

Liberty Global will have to go further to appease Sunrise shareholders concerned about the deal’s cost, analysts said.

“If Freenet, activists and ISS maintain their position as we suspect they will, Liberty Global will need to move on the price to get the deal done,” said Berenberg analyst Usman Ghazi.