BT Group revealed that it started exclusive negotiations over the acquisition of the British wireless joint venture of Deutsche Telekom AG and Orange SA, called EE.
The value of the deal, which has been discussed over the talks, amounted to £12.5 billion ($19.5 billion). BT also said that the period of exclusive talks is expected to last “several weeks” and an eventual deal, if such is to be signed, will have to be approved by the U.K.-based companys investors.
EE was founded half a decade ago after the T-Mobile of Deutsche Telekom and the U.S.-based operations of Orange merged in order to form a joint venture.
Mark Murphy, an analyst at Macquarie Group shared his belief that the price was rational with a larger cash element than initially expected. He commented on the eventual deal for Reuters: “EE is a good asset, with a good network and good spectrum. You could see that as a sign that BT is pretty confident this is going to be a really important positive deal for them, and they are happy to do it in cash and the market is probably going to be happy to help them raise additional equity, which looks likely.”
According to a statement made by Orange and Deutsche Telekom, the price of the acquisition, expected to be paid in both cash and new BT shares, would be divided in equal parts between the partners. If the acquisition is finalized, a ration of roughly 50:50 will be paid to both owners of EE.
The announcement of the negotiations comes after the carrier has been in competing talks with both Deutsche Telecom and Orange, which hold EE and Telefonica SA, which owns the mobile firm O2.
If the acquisition of EE is finalized, BT would get access to 28 million wireless customers. The U.K.-based group would also form the biggest provider of mobile, home-phone, TV and Internet service bundles. In case the companies reach an agreement, Deutsche Telekom will get a 12% stake in BT. Orange, on the other hand, will have a 4% stake plus a higher proportion of the cash payments.
BT Group added 1.51% to trade at GBX 404.00 per share as of 10:08 GMT, marking a one-year gain of 8.06%. The company is valued at GBP 32.36 billion. According to the Financial Times, the 20 analysts offering 12-month price targets for BT Group have a median target of GBX 455.00, with a high estimate of GBX 600.00 and a low estimate of GBX 245.00. The median estimate represents a +14.32% increase from the last price of GBX 398.00.
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