France: France Telecom sets Orange offer dates

France Telecom said its offer to buy out Orange, its mobile-phone arm, would run from September 12th through to October 7th, says the Financial Times

The French telecommunications group last week said it would pay €7.1bn in stock to buy out minority shareholders in Orange, a move that reverses the former national monopoly's spin-off of its mobile subsidiary 30 months ago.

The move to reassert control over Orange reflects the rapid return to health of France Telecom following a state-backed €15bn rights issue, the desire of Thierry Breton, its new chief executive, to reverse the group's excessive decentralisation and the relative decline in valuations for mobile operators.

France Telecom is offering 11 of its own shares for 25 Orange shares, implying an 18% premium to Orange's closing price before the plan was announced.

Orange shares, which were offered to retail investors at €9.50 in February 2001, rose as high as €9.82 after the offer was announced. They opened at €9.57 on Thursday.

France Telecom shares, which have trebled in value during the past year as it has grappled with what was once a €68bn debt burden, have edged down more than 4% since the offer was announced. They were trading at €21.82 on Thursday morning.

Minority shareholders, who control 13.6% of Orange's shares, will end up with a 12% stake in France Telecom if they accept the offer. If France Telecom succeeds in increasing its stake in Orange to above 95%, it can force the purchase of remaining minorities.

The bid will see the French state's stake in France Telecom, which must by law remain above 50%, fall from 58.9-54% on a non-diluted basis and to just above 50% on a fully diluted basis, taking into account equity-linked instruments, which are out of the money.

The French government is changing the law, to allow it to proceed with a privatisation programme that is vital to the health of the public finances. The government's majority stake in France Telecom is its most valuable monetisable asset.

© 2003 Financial Times Information Limited.

Source: Financial Times.