Telefonica Buys O2 For GBP17.7 Billion In Cash Deal
LONDON -(Dow Jones)- Telefonica, the Spanish incumbent telecommunications operator, Monday said it has agreed to buy O2 PLC, the U.K. mobile telecoms company, for GBP17.7 billion in cash.
The agreed cash deal, at 200 pence a share, represents a 22% premium to O2's share price at the close of trade Friday. The deal ends years of speculation about O2's future. O2, the star performer in the European mobile telecoms sector over the past three years, has attracted attention from German telecoms giant Deutsche Telekom AG and Dutch incumbent operator KPN NV over the past two years.
The deal follows Telefonica's acquisition of Czech operator Cesky Telekom earlier this year as it looks to expand its business aggressively across Europe.
The Spanish telecoms company will acquire O2's assets in the U.K., Germany and Ireland, and won't face the same regulatory hurdles as other rumored bidders as Telefonica doesn't operate in those markets.
Goldman Sachs Group Inc. and Citigroup are acting as advisors to Telefonica.
Telefonica has obtained committed financing, arranged by Citigroup, Goldman Sachs and the Royal Bank of Scotland Group PLC.
Telefonica said the acquisition is a logical step in its pursuit of a superior growth profile relative to its peers. It estimates it can generate GBP199 million in annual cost savings and capital expenditure synergies by 2008.
The deal will be immediately accretive to earnings per share, net cash and free cash-flow, the company said. This will enable the Spanish company to preserve its dividend and share buyback policies.
O2's management team will continue to lead the business which will retain its brand and remain headquartered in the U.K. O2 investors will still receive an interim dividend of 1.54 pence a share for the six months to Sept. 30, 2005.
JP Morgan, Cazenove and Merrill Lynch & Co. Inc. advised O2.
Company Web site: http://www.o2.com; Http://www.telefonica.com
-By Nic Fildes, Dow Jones Newswires; 44-20-78429264; nicolas.fildes@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 31st October 2005