France Telecom Wants Equant

France Telecom announces proposal to acquire full ownership of Equant

January 24, 2005

4 Min Read

PARIS -- France Telecom today announced that it has made a proposal to the Supervisory and Management Boards of Equant to acquire the entire business of Equant, its 54.2% subsidiary specialized in global communications services for multinational businesses. Under the terms of the proposal, France Telecom would acquire substantially all the assets and liabilities of Equant for a total aggregate consideration of EUR564m for the 45.8% portion of Equant not already held by France Telecom.

This proposal represents:

· an implied share price to Equant shareholders of EUR4.20 per share (subject to any applicable withholding and other similar taxes),
· a 16.7% premium over the closing price on January 21, 2005,
· a 15,4% premium over the average closing price over the last month,
· a 13,5% premium over the average closing price over the last 3-month period. The acquisition would be followed by a distribution of the sales proceeds to Equant shareholders. Following such distribution, Equant N.V. would be de-listed and liquidated.

Transaction timeframe and conditions

This proposal is subject to the approval of each of the Management and Supervisory Boards of Equant, and requires the unanimous approval of the three independent members of the Supervisory Board of Equant. Consummation of this transaction, once agreed, would also be subject to a number of conditions including approval by Equant's shareholders at an Extraordinary General Meeting. France Telecom will vote at that shareholder's meeting, which requires a simple majority for approval. In view of these conditions, the transaction should be completed, and liquidating distributions paid to shareholders, no sooner than May 2005.

France Telecom underlines that its objective is to acquire Equant's business as a whole and that it has no interest in a disposal of its controlling interest in Equant. Goldman Sachs International and Sullivan & Cromwell LLP, NautaDutilh and Jones Day are advising France Telecom in connection with this transaction.

Separately, despite a better than expected year-end cash position, the anticipated further deterioration in Equant's results in 2005 and later years has led Equant to request from France Telecom a $250 million credit facility to assist Equant in meeting its financing requirements into 2006. France Telecom has agreed to provide that facility.

New step in France Telecom's integrated operator strategy

- Acceleration of the implementation of a unified enterprise market strategy consistent with the integrated operator model
- Leveraging Equant's international customer base, global distribution and networks, world-class execution capabilities and recognized leadership in IP VPN technology
- Addressing the evolving needs of corporate customers through deployment of integrated solutions and services, convergent offers and infrastructure, and single customer interface

· Attractive proposal for Equant minority shareholders

- Acquisition by France Telecom of substantially all of Equant's assets and liabilities
- Transaction provides a long-term answer to the structural challenges facing Equant on a stand-alone basis
- Net cash-out for France Telecom of 564 million euros
- Implied share price of 4.20 euros per Equant share (subject to any applicable withholding and other similar taxes)
o A premium of 16.7% over last closing price on January 21, 2005
o A premium of 15.4% over one month; 13.5% over 3 months
- Governance process comprising:
o Approval of the proposal by the Equant Management and Supervisory Boards, and the General Assembly of Shareholders of Equant
o Unanimous agreement of the independent Supervisory Board members
o Independent expert opinion on the fairness of the price for Equant's minority shareholders, in addition to the fairness opinion of Equant's financial advisor

· Confirmation of France Telecom's financial objectives

- Acquisition of minority shareholdings in accordance with use of cash policy
- No change in France Telecom's objective of net debt to operating income before amortization and depreciation of less than 2 at the end of 2005, under French GAAP
- No impact on France Telecom's distribution policy

Leveraging benefits of integration on the enterprise market

"Our proposal represents an excellent opportunity for Equant shareholders. The proposed transaction will provide Equant with a financially sound base and broader resources to continue deploying state-of-the-art solutions to enterprise customers who are demanding increased integration", said Michel Combes, Chief Financial Officer of France Telecom. "For France Telecom, integrating Equant's business is consistent with the Group's transformation aiming to offer demand-driven, integrated services to its customers in the enterprise, home and personal segments. This is an opportunity for France Telecom to re-affirm its commitment to its business customers and consolidate its leadership on the enterprise market", he said.

This proposal, in addition to offering France Telecom the opportunity to accelerate its integrated operator strategy on the enterprise market, constitutes a long-term answer to the structural challenges facing Equant on a stand-alone basis.

Proposed acquisition of Equant minorities: net cash-out for France Telecom of EUR564m

France Telecom SA

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