France’s Orange apparently signed a confidentiality agreement with smaller rival Bouygues, with a view of securing a take-over of its telecoms arm in a deal worth €10 billion.
French newspaper Journal du Dimanche reports the companies signed the agreement on 24 December to mark the start of official negotiations. Bloomberg first reported that Orange was eyeing a deal for Bouygues Telecom at the beginning of last month.
As part of the reported terms of the deal, Bouygues would receive a 15 per cent stake in Orange, valued at approximately €8 billion, with the remaining €2 billion paid in cash, according to the publication.
In turn, France’s 23 per cent stake in Orange could also be diluted to under 20 per cent should state investment company BPI sell part of its holding. Bouygues would however still retain a lower stake than the state, said a source.
As part of the talks, Orange could also take a 10 per cent stake in France’s largest commercial television channel TF1, which is owned by Bouygues, according to a separate report from Le Canard Enchaine newspaper.
This week, the two parties will reportedly hold a series of meetings on valuation, governance, social and competition. According to sources, the latter will be considered in France, and not by the European Commission in Brussels, should the talks advance.
“The teams get along well and discussions have moved forward. We will know quickly if they are going to last,” said a source.
To meet competition concerns, Orange will also reportedly have to sell up some of its assets, including antennas, spectrum and subscribers, to market rivals Free Mobile and SFR Numericable.
According to the report, Orange hopes to recoup up to €5 billion from the asset disposal, although it is yet to approach the two companies in question.
A merger between Orange and Bouygues would reduce the country’s telecoms market to three players, and the tie-up could also face political scrutiny.
According to GSMA Intelligence, the combined entity would have a mobile market share of more than 50 per cent.