French telecoms group Iliad has officially scrapped plans to acquire Deutsche Telekom (DT)-controlled T-Mobile US. The owner of low-cost operator Free Mobile said its decision came after DT and T-Mobile board members turned down its improved offer,…
French telecoms group Iliad has officially scrapped plans to acquire Deutsche Telekom (DT)-controlled T-Mobile US.
The owner of low-cost operator Free Mobile said its decision came after DT and T-Mobile board members turned down its improved offer, sending the US operator’s shares down 4.3% to US$26.41.
At the end of July, Iliad, which is owned by French tycoon Xavier Niel, submitted an opportunistic US$33 per share cash offer for a 56.6% stake in T-Mobile US.
However, the offer was deemed insufficient by DT, which holds 67% of T-Mobile, and therefore rejected.
The initial bid came as the US’ third-largest operator, Softbank-owned Sprint, shelved its plans to take over its rival over regulatory concerns.
Last month, Iliad teamed up with two private equity funds and international banks, which reportedly included KKR, to draft an improved bid for the US operator.
Under its new offer, it was willing to acquire 67% of the company for US$36 per share including cost savings. According to Berenberg research estimates, that equated to a US$33.8 per share offer.
Iliad, which had set a mid-October deadline to decide on its T-Mobile US bid, said the improved offer would have fitted into the group’s strict financial policy in terms of indebtedness and dilution.
It would also have accelerated T-Mobile US’ transformation, providing more than US$2bn in annual cost savings, the company claimed.
However, DT was reportedly concerned about Iliad’s not having a track record in the country.
In a recent e-mailed statement, DT reiterated that the company was open to transaction opportunities but that any deal would need to add more value to T-Mobile shareholders than a stand-alone case.
Iliad’s failed bid for T-Mobile has fuelled speculation that DT might now focus its efforts on negotiating a deal with US DTH provider Dish Network, which has openly expressed an interest in a tie-up with the US’ fourth-largest operator.
A source familiar with DT’s thinking was quoted telling Reuters that the German incumbent may also be tempted to remain in the US market for a bit longer as the company is still growing.
Iliad said yesterday it would continue its profitable growth policy but did not disclose whether it would continue to pursue M&A opportunities in the US or would be focusing on domestic growth.
According to Berenberg analyst Wassil El Hebil, the T-Mobile US bid withdrawal will likely encourage Iliad to accelerate consolidation in the French market with a potential bid for rival Bouygues Telecom, France’s third-largest mobile player.
“If Iliad pays €8bn to acquire Bouygues Telecom, the deal would remain accretive to its shareholders – without taking into account the possible upside from market repair”, he wrote in a note.
Iliad’s shares were up 12% this morning to €175, while Bouygues, the parent of Bouygues Telecom, saw its stock jump 3% to €25.25.
Iliad did not respond to a request for further comment, while Deutsche Telekom declined to comment.
