Colt Group's largest shareholder, asset manager Fidelity, has offered to take it private in a deal valuing the telecommunication service provider at about £1.72 billion.

The 190 pence a share cash offer undervalued Colt, the company’s independent directors said yesterday. The offer represented a 21.3 per cent premium to the stock’s Thursday close.

Shares in Colt, which runs fibre optic networks and data centres for companies, jumped as much as 23 per cent to 192.91 pence yesterday morning, above Fidelity’s offer. However they were later trading at 190 pence.

A third party could potentially pay much more for Colt, the independent directors said. However a deal would not go through unless Fidelity changes its plan to hold on to its stake through next year.

Fidelity, one of the founding investors of Colt, said it would not increase its offer. The firm held 62.4 per cent of Colt.

The offer has been accepted by Standard Life Investments and Ruffer, which together held about 7.8 per cent of Colt, Fidelity said. “We have accepted Fidelity’s. . . offer as being the best available option in the circumstances,” a spokeswoman for Standard Life Investments said.

Other top shareholders were either unavailable to comment or declined to comment.

"I would consider it [the offer] redemption for long-suffering Colt shareholders," Andrew Darley of brokerage finnCap told Reuters.

Colt shares, yesterday’s top percentage gainer on London’s FTSE-250 Midcap index, have fallen about 11 per cent since listing in 2006. Reduction in call rates have hit its voice services business, which bring in nearly a third of its revenue.

On its own, Colt will find it difficult to generate “meaningful cash flow” due to inferior economies of scale compared with competitors, JP Morgan Cazenove analysts had said in February when the company announced results. – (Reuters)