France Telecom and Vodafone race to complete œ28bn Orange buyout
By Bill McIntosh
27 May 2000
France Telecom and Orange were last night scrambling to put the finishing touches on a 45bn-euro (œ28bn) buyout of Britain's third-ranked mobile phone group from Vodafone AirTouch, sources said.
It is understood France Telecom is proposing to spin off its mobile interests ? notably its French market leading Itineris unit ? which would be combined with Orange and refloated. A flotation of the newly created mobile group would be undertaken later this year or early in 2001.
A commitment to the creation of a separate mobile group and a float is understood to be required if Hans Snook, Orange chief executive, and his management team are to remain.
A source said: "Obviously everyone knows Snook is the issue. That's what is being worked on. The Orange management team is a key issue. There have to be negotiations with and involving them, and that's ongoing." France Telecom and Orange would not comment on the talks, but it is understood that executives from both companies have been in contact in recent weeks.
The sale process has been complicated by Vodafone being unable to present details of an offer to Orange management, due to undertakings given to the European Commission when Vodafone sealed its œ80bn take-over of Mannesmann in February. Those ban direct contacts with Orange, bought by Mannesmann in November, to guarantee the UK group's independence before demerger.
It is understood the terms of France Telecom's offer to Vodafone will include up to 20bn euros in cash and 15bn euros in France Telecom stock. France Telecom would also assume 10bn euros of Orange debt, which would be included on the balance sheet of the combined mobile group after its flotation.
Vodafone would emerge with almost 10 per cent of France Telecom. It could later place that in the market or with institutional investors. It could also swap all or part of the France Telecom stake for shares in the new mobile group and place the interest with brokers when the new company is floated.
A deal would create the world's third-biggest mobile group with more than 19 million owned customers. Vodafone, with 50 million customers, and NTTDoCoMo of Japan with 30 million, lead the mobile industry.
Vodafone is anxious to secure a trade sale immediately rather than wait for a relisting of Orange, which would be unlikely to occur before early autumn. Vodafone is saddled with œ20bn in debt and needs funds to secure third-generation mobile licences over the summer.
Europe's next big mobile frequency auction is set to get under way in Germany in June. Analysts believe proceeds from the sale could surpass the œ22bn raised in Britain's auction.
Vodafone shares closed down 5.75p at 281.5p. France Telecom was up 5.9 euros at 141.8 euros.
France Telecom is being advised by Morgan Stanley and CSFB, and Vodafone by Goldman Sachs and UBS Warburg |
