Telefónica has entered into an exclusivity agreement with Hutchison Whampoa in relation to Hutchison’s potential acquisition of O2 UK, Telefónica’s subsidiary in the UK, for £10.25 billion (€13.5bn) in cash.
The agreement includes an initial amount of £9.25 billion which would be paid at closing of the transaction and an additional deferred payment of £1 billion. The exclusivity period will last several weeks, allowing Telefónica and Hutchison Whampoa Group to negotiate definitive agreements, while the necessary due diligence process on O2 UK is completed.
Telefónica says the proposed deal marks another step in its transformation process, initiated with the aim of becoming a leading digital telco and accelerating sustainable long-term growth while maintaining an attractive remuneration policy.
Telefónica says the announcement occurs at a decisive moment for the company, following a period during which it has been proactively managing its portfolio of assets, significantly reinforcing its position in key markets (consolidating Germany, acquiring GVT in Brazil – pending regulatory approvals- or undertaking a commercial and technological revolution in Spain) and therefore increasing its potential for future growth.
Telefónica suggests the announcement shows that it continues to lead the European consolidation process and it will allow the company to strengthen its financial flexibility.
UK telco BT had confirmed on November 24th that it was in discussions with Telefónica and another operator regarding a potential acquisition, but announced on December 15th that it had entered into an exclusivity agreement with Deutsche Telekom and Orange to acquire of all of their UK mobile business, EE, a move that significantly enhanced its ability to provide a quad-play offering.
BT sold O2 to the Spanish telco in 2005 for £18 billion.