MADRID — Telefonica, Spain’s biggest telephone company, has agreed to buy British mobile phone operator O2 for £17.7 billion ($31.5 billion) in the largest acquisition in the European phone industry in five years.
Telefonica offered 200 pence in cash per O2 share, the Madrid-based company said in a statement. The offer for O2 is 22 percent higher than Friday’s closing price of 164.25 pence.
Buying O2 will give Telefonica 25 million customers in Britain, Germany and Ireland, bringing its total to more than 165 million.
The deal would be the largest led by chairman Cesar Alierta, 60, who is seeking assets in Europe after spending more than $50 billion on takeovers in Latin America since the 1990s.
"Telefonica can’t push much further into Latin America," said Gary Dugan, head of equity research at Barclays Investment Services. "You have to get bigger globally and not just protect your backyard."
The stock of O2 rose as much as 26 percent to 206.75 pence, above the offer price, and traded at 204 pence in early trading in London. The shares of Telefonica and its mobile phone unit Telefonica Moviles were suspended from trading in Madrid, the exchange said.
The purchase will "immediately" add to earnings per share, according to the statement.
The deal would be the biggest takeover announced in the industry worldwide since the $41 billion acquisition of Nextel Communications proposed in December 2004.
It is the largest involving a European telecommunications company since May 2000, when France Telecom agreed to buy Orange from Vodafone for $41.7 billion, according to Bloomberg data.
The board of O2 said it considers the bid "fair and reasonable" and would recommend its shareholders accept it.
O2 "will open the group to the two largest European markets with sizeable critical mass, and it will balance our exposure across business and regions," Alierta said in the statement.
The British company is the biggest mobile phone operator in Britain by customers. Its second-biggest market is Germany, and it also offers services in Ireland.
Up to Monday, O2 shares had jumped 56 percent in the last 12 months as the company has been the focus of takeover speculation ever since it rejected a bid from Dutch-based KPN in February 2004.
Germany’s Deutsche Telekom and KPN ended talks to make a joint bid for O2 in August. Under the plan, KPN would have taken control of O2’s German business.
"It’s the European operator that better fits Telefonica’s strategy," said Alberto Espelosin, who helps manage $7 billion, including Telefonica shares, at Ibercaja Gestion in Zaragoza, Spain. "The key will be whether Deutsche Telekom wants to make a higher offer."
Alierta said in September that Telefonica "would make selective acquisitions" to add growth. In June, the former Spanish phone monopoly acquired a controlling stake in Cesky Telecom, the biggest Czech phone company, for 2.7 billion euros ($3.3 billion).
In September, it spent an additional 917 million euros to boost its stake in Cesky Telecom to 69 percent.
Goldman Sachs and Citigroup advised Telefonica. JPMorgan Cazenove and Merrill Lynch advised O2.
via [moscow times]