Cable and Wireless' board announced they have accepted the deal, after receiving an extension from the Takeover Panel last Thursday.
Under the terms of the Offer, CWW Shareholders will be entitled to receive 38 pence in cash for each CWW Share held, a premium of 92% on Friday's closing shareprice of 19.8p at the start of the offer period in February.
This values the company at £1.044bn, but the deal is still subject to approval by CWW's shareholders. Vodafone beat out India's Tata Communications, which pulled out of the bidding last week.
Cable and Wireless owns the UK's largest fibre optic network, and nearly half a mission kilometres of undersea cables worldwide. This means that Vodafone is now a significant domestic landline provider, in competition with BT and Virgin. Vittorio Colao CEO of Vodafone believes the deal is a good one for his company.
"We are pleased to reach agreement with the Board of Cable & Wireless Worldwide, who unanimously recommend our offer. The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations. We look forward to working with the management and employees of Cable & Wireless Worldwide to combine our expertise for the benefit of our customers and shareholders."
It is understood that Vodafone wants to split off the undersea cables division and sell it to international investors, maintaining its hold on the domestic fibre network.
CWW has struggled for the last two years since its split from Cable & Wireless Communications in 2010. Modern user habits and the recession have seen fixed-line phone calls plummet. It has issued three profit warnings, and sacked three CEOs in that time.
Chairman of CWW John Barton is recommending the deal to shareholders.
"The offer from Vodafone announced today will enable shareholders to crystallise a value, in cash, that represents a significant premium to recent trading levels and avoid exposure to the risks inevitably presented by executing a medium-term improvement strategy," he said.
"Furthermore, the combination with Vodafone represents an exciting opportunity for Cable & Wireless Worldwide's customers, employees, partners and other stakeholders to benefit from the many advantages that will come from being part of the Vodafone Group."
UBS is acting as sole financial adviser to Vodafone and Vodafone Group. Barclays and Rothschild are acting as joint financial advisers to CWW.