Jazztel shares soar after 3.4-bn euro bid by France's Orange
Shares in Spanish fixed-line operator Jazztel soared over six percent on Tuesday, a day after French telecom giant Orange made a 3.4-billion-euro bid for the firm against a background of restructuring in the European telecom sector.
Orange, formerly known as France Telecom, said late on Monday it would offer Jazztel shareholders 13 euros per share, 34 percent above the average closing price of the last 30 trading days.
The company said that the offer, including stock options held by some Jazztel managers, is worth a total of 3.4 billion euros ($4.4 billion).
The offer, which will be formally presented to Jazztel shareholders later on Tuesday, is subject to regulatory approval as well as to winning the backing of at least 50.01 percent of shareholders.
If successful, the deal would create Spain's second-biggest fixed broadband carrier and third-biggest mobile network operator.
"We are doing this deal to accelerate our growth in Spain, particularly in fixed-mobile convergent offers," Orange Chief Executive Stephane Richard said in a statement.
Shares in Jazztel rose 6.02 percent to 12.77 euros in late morning trading.
By comparison, the benchmark Ibex 35 index of most traded shares fell 0.60 percent.
Consolidation of the crowded and deeply fragmented European telecom market has intensified over the past year as small players have fallen prey to bigger rivals, reducing the number of operators in each market.
Analysts say a reduction in the number of large operators could help boost profit margins in the industry after years of fierce competition during an economic downturn.
Earlier this year, Vodafone in Spain purchased Ono, a midsized cable operator for 7.2 billion euros.
The European Commission gave that acquisition the green light in July, judging that Vodafone's mobile telecoms activities were largely complementary to Ono's fixed-line services.
The European Commission also paved the way that month for the creation of Germany's biggest mobile company when it cleared the acquisition of E-plus in Germany, a unit of Dutch KPN, by Spain's Telefonica.
The acquisition, estimated at 8.5 billion euros ($11.6 billion) in cash and a 20.5-percent stake in Telefonica Deutschland, merges Germany's third and fourth-biggest operators, leaving only Deutsche Telekom and Vodafone as similar-sized rivals.
In April, European cable group Altice won a bidding contest for France's second-biggest telecom operator SFR, beating a government-backed offer from Bouygues by agreeing to a deal valued at over 17 billion euros.
Orange said Jazztel's chairman Leopoldo Fernandez Pujals, who owns a 14.5-percent stake in the company, will accept its offer.
The company expects to save 1.3 billion euros by merging with Jazztel, mostly through network efficiencies.
Spain is Orange's second-biggest market, accounting for about 10 percent of the group's revenue.
© 2014 AFP