France Telecom has made a formal bid for TeliaSonera, at SEK 56.225 per share. The French operator said the bid was "firendly and indicative", and represented a 26% premium on TeliaSonera's price on April 15, the day before its interest in the Nordic operator was made public.
TeliaSonera has rejected the bid, saying it "substantially undervalues" the company. A bid at that price would total about 282.9 billion kronor ($46.8 billion).
“TeliaSonera is a strong business with excellent growth prospects in its own right. The Board and management are focused on developing the company to its full potential, driving strong and sustainable earnings growth and maximising value for all shareholders. The indicative price of SEK 56.225 per share significantly undervalues this potential,” says Tom von Weymarn Chairman of the Board of TeliaSonera.
France Telecom said its offer is made up of 52% cash in euros and 48% shares based on an exchange ratio of three newly issued France Telecom shares for 11 existing TeliaSonera shares. A cash guarantee option would be available to all shareholders for their first 500 shares tendered. It also claimed its bid for 52% of the shares would be equal to roughly SEk63 per share – a number not referred to by TeliaSonera in its rejection.
A merged company would be the number four player globally in mobile, France Telecom claimed, after China Mobile, Vodafone and Telefonica – with subscribers totalling 108 million. The combined entity would place fourth in fixed broadband globally.
"The combination of the two groups, and the resulting enhanced scale and reach, would constitute a significant competitive advantage, not only in the capacity to rapidly develop innovative services and products but also in the ability to deliver these services and products to an extended customer base. The resulting combination of nimbleness and scale would be key in securing the most advantageous partnerships with the world’s global leaders in software, hardware, content and advertising," a France Telecom statement said.
France Telecom said synergies in core activities encompass economies of scale and strengthened negotiating power with regard to network and IT expenditure, handset procurement, R&D and support, as well as traffic optimization. Such synergies could generate operational free cash flow savings of nearly 1% of the 2007 pro-forma revenues for the combined group by 2013, with approximately 70% of such savings being achieved by 2011.