Telefonica agrees £18bn deal for O2
Long term takeover target O2 has agreed to a £17.7bn offer from Spanish telecoms giant Telefonica in a deal that will see yet another British phone firm fall to foreign ownership.
Since leaving BT four years ago O2’s relatively small size in Europe has seen it touted as the perfect target for acquisitive rivals.
O2 stock leapt more than 25 per cent to close at 205.75p as investors speculated about the prospects of a counter-bid, with Deutsche Telekom named by many as a potential bidder. However, a source close to the deal said: “This offer has no regulatory issues associated with it and that can’t be said about any of these other potential bidders that are being talked about.”
A spokesman for Deutsche Telekom refused to comment.
Telefonica’s 200p-a-share bid, announced yesterday after just days of discussions, represents a 22 per cent premium to O2’s closing share price last Friday. O2, with its 24.6m customer base, will give Telefonica access to Europe’s two largest mobile markets — Britain and Germany — as well as high spending phone users in Ireland. A combined group would have 170 million subscribers with the O2 element continuing to be based in Britain.
Sir David Arculus, chairman of O2, said: “This offer from Telefonica, which reflects the value created since demerger and the potential of the O2 Group going forward, is an excellent opportunity for O2 shareholders to realise significant value in cash now.”
Analysts said rival mobile operators such as Orange and Vodafone had recently been sniffing around Telefonica’s home market, forcing the Spanish company to look overseas to both find new growth and shore up its business for the longer term.
Telefonica will fund the deal with loans from Royal Bank of Scotland, Citigroup and Goldman Sachs. It is being advised by Goldman Sachs and Citigroup while JP Morgan Cazenove and Merrill Lynch are advising O2. Virgin could be the next to attract an approach.