France Telecom SA offered 252.5 billion kronor ($41.9 billion) to buy Sweden's TeliaSonera AB and create the world's fourth-biggest telephone company.
The cash and stock offer values TeliaSonera at 56.23 kronor a share, France Telecom said in a statement yesterday. The price is 26 percent higher than TeliaSonera's price on April 15, the day before France Telecom's interest became public. TeliaSonera's board won't back the bid because it's "far below" the company's value, Chairman Tom von Weymarn said in an interview.
Buying TeliaSonera would be Paris-based France Telecom's biggest deal since it bought Orange Plc for 27.8 billion pounds ($55.1 billion) in 2000. France Telecom's shares have fallen 13 percent since its interest in TeliaSonera became known, on concern it would issue new stock to pay for the purchase.
"The bid is a little on the low side," said Per Colleen, head of Swedish equities at DnB Nor Asset Management in Stockholm, which manages the equivalent of $5.8 billion.
France Telecom Chief Executive Officer Didier Lombard previously said the company was seeking growth in emerging markets including Vietnam and Ghana, where mobile-phone use is growing faster than in the operator's main markets of France and the United Kingdom. The company has said it would stick to debt-ratio targets and its cash dividend policy.
France Telecom will pay in cash for 52 percent of TeliaSonera's shares, and 48 percent in stock. It will offer three new France Telecom shares for 11 TeliaSonera shares, with a cash guarantee option for the first 500 shares.
"That's a pretty steep premium and to be honest I don't see the logic behind it," said Chris-Oliver Schickentanz, head of company research at Dresdner Bank AG in Frankfurt. "There will be some minor synergies in Spain but other than that nothing significant."
The combined company would have 237 million subscribers, of which 168 million would be mobile-phone users and 69 million would be fixed-line customers.
The acquisition would add to France Telecom's earnings per share beginning next year, and would become accretive in 2011 to free cash flow per share. France Telecom will only pursue a friendly takeover, according to the statement. France Telecom said it will list its shares in Stockholm and Helsinki after the purchase.
The Swedish government has said it plans to sell TeliaSonera shares. Sweden holds 37.3 percent of TeliaSonera and Finland owns 13.7 percent.
France Telecom said April 18 the Swedish government's sale of TeliaSonera would be a "strategic opportunity" and that the companies were complementary.
Gervais Pellissier, France Telecom's chief financial officer, said the company spent more time studying TeliaSonera than other potential takeover targets because it has a shareholder that wants to sell.
"We're in a market and a business environment that is in total evolution," Pellissier said at the time. "Size is becoming an essential element."
Lars Nyberg, TeliaSonera's CEO, is seeking growth in European and Asian countries to add to assets in Spain, Turkey and Tajikistan.
Source: China Daily/Agencies
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