France Telecom’s stock price says it all. Shortly after Monday morning’s news that France’s leading telco had abandoned its $42bn bid for TeliaSonera after failing to agree a price with the Nordic group’s main shareholder, the Swedish government, France Telecom shares rose 7 per cent in early Paris trade.
Many France Telecom shareholders and industry analysts had questioned the strategic logic behind the transaction, pushing the share price down by 20 per cent since it was announced, although France Telecom insisted the acquisition of TeliaSonera would enhance business and enable the enlarged group to negotiate better deals with suppliers such as Nokia and companies such as Google.
Sometimes, as Lex noted last Thursday: “it’s good to talk about talks, but not for too long”. But we’re wondering whether someone at France Telecom read Lex’s advice and is planning to bring the saga back to life:
To break the stalemate, France Telecom has one move left: a Microsoft-style flounce out of the talks. The hope is this would crash TeliaSonera’s shares and bring its management trembling to the table. If France Telecom were to walk away, TeliaSonera’s shares, which slipped nearly 3 per cent to SKr51 [on Wednesday], would be likely to fall even further towards the unaffected price.
Sure enough, by late Monday morning, TeliaSonera was down nearly 14 per cent at SKr43. No “trembling management” back at the table just yet - but for now, investors on both sides are celebrating, not least, the end (for now) of a tiring, maybe-maybe-not takeover saga.
France Telecom meanwhile would only say on Monday that it had decided not to submit a firm offer to TeliaSonera’s shareholders, adding: “Notwithstanding the interest shown in the project, the dialogue opened with the board of directors of TeliaSonera was unable to reach agreement on its financial conditions.”
In a surprising reversal of its earlier comments, the French group also stated that TeliaSonera “is not essential to the pursuit of its strategy”.
The proposed transaction would have created Europe’s largest telecoms company, notes the FT, but the tie-up had struggled to generate support from both the French and Swedish sides as well as from shareholders.
France Telecom made a cash and share offer that, depending upon its share price, valued TeliaSonera at around SKr55 a share. The Swedish government, which owns 37 per cent of TeliaSonera, was widely understood to want an offer that “began with a six”.
The French side had indicated that it might be prepared to increase the cash portion of its offer modestly, though it’s not known if a higher price was put on the table. The termination of the talks will also be well received in Sweden, adds the FT, where the price France Telecom had offered in its cash and share bid was seen by the government and commentators as too low.
Options for disposing of the Swedish government’s stake might now include reducing it in packages to the market, similar to the way in which it sold an 8 per cent stake in TeliaSonera to institutional investors earlier this year.
Such a solution would “raise the necessary revenues without the complications of a foreign takeover”, notes the FT. Also, “Stockholm may be able to get a better price from the market than it would from a synergy-hungry buyer,” notes the FT.
