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France Telecom proposes €27 billion merger with Sweden’s TeliaSonera

France Telecom proposes €27 billion merger with Sweden’s TeliaSonera
AP
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First Published: Thu, Jun 05 2008. 04 26 PM IST
Updated: Thu, Jun 05 2008. 04 26 PM IST
Paris: France Telecom said on Thursday it has proposed a merger with TeliaSonera valued at more than €27 billion (Rs1,78,000 crore) that would create the world’s fourth-largest telecommunications operator. However, the bid was quickly rejected by the Swedish operator which termed it as too low.
France’s dominant telecoms operator stopped short of a formal offer, but suggested terms that it said would amount to a 39% premium on shares of TeliaSonera based on their 15 April 2008 closing price — the day before the first information of the planned deal was published.
In a statement, France Telecom said it sent the “indicative proposal” to the board and the two largest shareholders of the Swedish company. The proposal would involve cash equivalent to 63 Swedish kronor ($10.43) per share and stock based on an exchange ratio of three newly-issued France Telecom shares for every 11 TeliaSonera shares.
France Telecom cautioned that there was no certainty that the proposal would lead to a public offer for TeliaSonera.
Stockholm-based TeliaSonera responded by saying its board had unanimously rejected the proposal, which the Swedish company said amounted overall to 56.2 kronor, or $9.30, per share. That “substantially undervalues the company,” TeliaSonera said in a statement.
France Telecom CEO Didier Lombard said in a conference call that he spoke to his counterpart at TeliaSonera on Wednesday night about the bid, and called the Swedish company’s position “normal.” He said that discussions are still underway on firming up the offer and different “hypotheses.”
Lombard said he hoped to wrap up the merger by year-end. He said the possible bid would accomplish two of France Telecom’s objectives: Expanding into mature markets and exposing France Telecom to more emerging markets.
“There is an evolution of all mature markets and if you don’t have a certain consolidation of activities — including Internet and mobile phones — you will progressively have competitive difficulties,” Lombard said, noting that his company is more present in Africa while TeliaSonera is more present in Eurasia.
Several analysts questioned the price tag and strategy laid out by France Telecom.
“This offer is definitely too low,” Oko Bank analyst Kimmo Stenvall said, noting it would only offer about a 5% premium to TeliaSonera’s 12-month average share price because a large chunk of the payment would be made in France Telecom shares. “They have to raise the cash component, or offer more shares.”
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First Published: Thu, Jun 05 2008. 04 26 PM IST