France-based global telco Orange announced that it is reducing its stake in UK operator to BT Group through an agreement whereby it will sell one third of its current interest in BT via a private placement of approximately 133 million shares.
As part of the transaction, BT will place an order for GBP 200 million in the placement of BT shares, at the placement price, part of which will go to its employee share ownership trust. This order will be fully allocated by Orange.
The private placement will involve the approximately 133 million shares in BT held by Orange subsidiary Atlas Services Belgium, which represent around 1.33% of the share capital of BT.
In addition, there will be a simultaneous issue of approximately GBP 520 million of bonds due 2021, exchangeable into BT shares for a further one third of Orange’s participation.
Following completion of the transactions, Orange will initially retain a 2.66% stake in BT. In the case of exercise in full of the exchange rights underlying the bonds, Orange would then retain a 1.33% stake in the company.
The exchangeable bonds, with a maturity of 4 years (unless subject to early redemption), are issued in GBP and will bear a coupon between 0% and 0.375% and will have negative interest rate after hedging in euros. The bonds will be offered at an issue price of between 100.5 and 100% of the principal amount, corresponding to an annual yield to maturity of between -0.125 % and 0.375 %.
The exchangeable bonds are expected to be issued in principal amounts of GBP 100,000 per bond and due to be redeemed at par at maturity. Holders of the exchangeable bonds may exercise their exchange right at any time from August 7, 2017 until the 55th calendar day before the maturity date of the bonds. Orange will be able to settle in cash, provide ordinary shares of BT, or a combination thereof.
Under the terms of the transaction, Orange will agree to a 90-day lock up for its remaining shareholding in BT, subject to waiver from the joint bookrunners and certain exceptions, notably the option to sell the BT shares to a strategic investor, where that investor agrees to be bound by a similar lock-up commitment.
Orange noted that the proceeds of these transactions will be used for the general corporate purposes.
- Orange acquired the interest in BT in 2016 through BT’s acquisition of UK operator EE, a 50/50 joint venture between Deutsche Telekom and Orange, through a transaction valued at approximately GBP 12.5 billion. Under the agreement, Orange received approximately GBP 3.4 billion in cash and a 4% stake in the combined BT-EE entity; Deutsche Telekom received a stake of 12% in BT, with a representative of Deutsche Telekom to be appointed to the BT board.
