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Battle for Amena Heats Up France Telecom Widely Picked As Winner

Posted on: Monday, 25 July 2005, 12:00 CDT

In a sign that the private equity shops that have dominated European deal-making in recent years are being squeezed out, France Telecom is the expected winner in a fight for the Spanish mobile company Amena.

France Telecom's cash-and-stock purchase of about 10 billion, or $12 billion, for Amena could be announced this week, possibly as soon as Tuesday, several executives involved in the negotiations said. Monday is a holiday in Spain.

Some executives cautioned Sunday night, however, that the deal was still not signed, and might fall apart. "Nothing is done, and anything can happen in one way or another," said one executive. "There are a lot of technical details" to sort out, he said.

France Telecom is a latecomer to the bidding for Amena, the mobile phone unit of Auna, the second-largest Spanish telecommunications company. Auna's three largest investors, the utilities Endesa and Union Fenosa and the banking group Santander, put the entire company up for sale this year.

If it seals the deal, France Telecom will beat two consortiums of private equity buyers, which have devoted several months to partnering up and setting terms of offers for Amena or all of Auna. France Telecom said on Tuesday that it was making an offer, more than a week after the deadline for Auna's bids.

The deal has the backing of the French government, which owns 35 percent of France Telecom, and has been eager to create industry leaders in France.

France Telecom's entry has angered some of the other bidders.

"The private equity companies had their noses punched," said a person involved in the negotiations. One consortium, led by the private equity firm Kohlberg Kravis Roberts, was so upset by France Telecom's last-minute offer that it pulled its bid for the whole company on Thursday.

Private equity buyers have dominated European mergers and acquisitions in the past two years, in part because corporate buyers have been sitting on the sidelines after overexpanding in the late 1990s.

That may be due to a change in the telecommunications sector. European telecom companies are due for another round of expansion, bankers who specialize in the industry say. Most have cut costs and streamlined operations and are stockpiling cash from their operations. And telecommunications executives who are selling all or part of a business often prefer to sell to other corporations rather than private equity buyers. Rival companies can often offer a higher price because they can find more synergies and cost cuts.

Adding Amena, which has 9.5 million customers, would substantially increase France Telecom's business in Spain.

A France Telecom spokesman, Nilou Du Castel, said Sunday there was "nothing new to report." An Auna spokesperson could not be reached on Sunday.

When the deal for Amena is announced, Auna and its shareholders are expected to quickly seal a 2.5 billion deal for its other subsidiary, which contains its fixed-line and cable business. The rival Spanish cable company Ono, backed by private equity groups including Providence Equity Partners, is expected to win that deal.

Source: International Herald Tribune

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