France Télécom (FT) has announced that it will buy the 13.8% of its mobile arm Orange that it does not already own, in a deal valued at EUR7.1 billion. The move follows the French government’s adoption in late July 2003 of a bill which gives the telco the option to buy out the minority shareholders of Orange and internet subsidiary Wanadoo. The purchase will give FT access to 100% of the profit generated by Orange, the group’s cash cow, a move which will help its quest to whittle down debt and push through radical restructuring. According to the Financial Times, FT will offer eleven of its own shares for every 25 Orange shares, a deal which represents a 21% premium on Orange’s average share price over the past three months. The offer will run from 12 September to 7 October and will be made with 95 million treasury shares and 218 million new shares. As a result of the deal the French government’s ownership of FT will be diluted to around 53%.
FT’s decision to make Orange a wholly owned subsidiary was announced at the same time as the company’s first half results, which show that the telco made a net profit of EUR2.5 billion in the six months to 31 June 2003, compared to a loss of EUR12.2 billion in the same period of 2002. Revenues climbed almost 2% to EUR22.85 billion, while operating profit jumped from EUR3.18 billion to EUR4.65 billion, driven by a 68% increase from Orange to EUR2.09 billion. Net debt stood at EUR49.3 billion, down by EUR18.7 billion from the start of the year.