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France Tel wins Equant
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November 20, 2000: 8:43 a.m. ET
France Telecom pays $3.5B in stock to gain controlling stake in network firm
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LONDON (CNNfn) - France Telecom SA finally took control of data network operator Equant NV in a $3.5 billion deal Monday after months of wrangling between the two Paris-listed firms.
In a three-stage deal Telecom will acquire the 35 percent holding (68 million shares) in Equant owned by the company's controlling shareholder SITA for $3.5 billion in Telecom stock. Telecom will also inject its Global One unit and $300 million in cash into Equant in return for 80.6 million new Equant shares. Finally, Telecom will pump $1 billion into the enlarged company through the issue of new shares convertible into Equant stock within five years.
France Telecom will end up with 54 percent of Equant and will nominate five members of the company's nine-strong board. Equant will retain its listings on the Paris and New York stock markets. France Telecom promised Equant's minority shareholders that if their shares were not trading at  60 or more three years after the takeover, France Telecom would pay them the difference in cash.
Equant will merge with France Telecom's Global One subsidiary to create a substantial data communications network focused on providing services to the business sector in 220 countries and territories.
After a number of false dawns in the talks, Equant (PEQU) investors celebrated the announcement of the deal by driving the shares up some 7 percent to 36.11 in midday trading in Paris Monday, after the shares earlier leapt as much as 21 percent. France Telecom (PFTE) shares were down 2.1 percent at 105.80. 
One of the hurdles to an agreement had been France Telecom's unwillingness to pay cash for Equant, while SITA was thought to have resisted a deal based on stock. But under the terms of Monday's deal SITA, a consortium of airlines from around the world, agreed to part with its shares in the data network firm for stock in France Telecom.
The deal values SITA's Equant shares at 51.10 each, a 37 percent increase over the stock's average price over the past 30 trading days, according to France Telecom.
Equant was formed as an airline reservation network, although its data-carrying capacity has since been substantially upgraded.
Global One was a joint venture with Deutsche Telekom (FDTE) and Sprint FON Group (FON: Research, Estimates), until the partners fell out acrimoniously and France Telecom took total control earlier this year.
In a statement the firms said the combination would generate more than $300 million annually in cost savings within three years. If the merger had occurred on Jan 1. 2000 the combination would have generated revenue of $1.3 billion in the first six months of the year, according to a statement from the firms. 
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Equant
France Telecom
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