Orange offers to buy Jazztel for EUR 3.4 billion

Orange has launched an offer to acquire Spanish broadband operator Jazztel in a bid to compete with its two main rivals Telefonica and Vodafone. The agreement, which values Jazztel at EUR 3.4 billion, follows months of rumours that Orange had intensified its search for acquisition targets in Spain to avoid being left out of the country’s telecoms market consolidation. The French operator made an offer for 100 percent of Jazztel shares at EUR 13 per share in cash, which Orange said was 34 percent more than Jazztel's average closing price in the last 30 days. The deal is subject to regulatory approval as well as to Jazztel shareholders tendering at least half of the stock on top of an almost 15 percent stake held by executives who have agreed to sell, including chairman Leopoldo Fernandez Pujals. 

Commenting on the bid, Orange’s biggest takeover attempt in almost a decade, the company’s CEO Stephane Richard said the operator had decided to move to accelerate its growth in Spain, particularly in fixed-mobile convergent offers. "The new company will be the incontestable number two in fixed services and third in mobile behind Vodafone, but we think we'll be able to take second-place pretty quickly," he told Reuters. Earlier he commented in a conference call that Orange and Jazztel were “the combination of two success stories in Spain”, adding that “with the economy recovering, it’s the right time to reinforce our presence.” He said the combination would generate additional revenue and cost savings amounting to EUR 1.3 billion and that the bid would be financed with a capital increase of no more than EUR 2 billion and a sale of hybrid bonds. Including the synergies, Orange said it would be paying 8.6 times Jazztel’s projected 2015 earnings before interest, taxes, depreciation and amortization.

Orange accelerated its negotiations with Jazztel after the Spanish operator’s share began to soar on rumours of an imminent takeover bid and after Jazztel itself last week confirmed it had begun discussions over the acquisition of a stake in TeliaSonera’s Spanish mobile unit Yoigo. However, it said the talks were still “in an initial phase” and would not necessarily be followed by an offer.

Jazztel, which uses Orange Spain’s network to provide its mobile service, currently has around 1.5 million broadband customers and a further 1.5 million mobile customers. It’s also set to reach a total of 160,000 fibre customers by the end of the year and has plans to accelerate its fibre deployment to reach 3 million homes by the end of 2014 and 7 million by 2017.