France Telecom is to buy the 46 percent it does not already own in Equant for 564 million euros ($732.7 million), to shore up finances at the high-speed communications network and improve its offering to business customers. France Telecom said on Monday it would offer minority Equant shareholders 4.20 euros per share in cash, a premium of 16.7 percent to Equant's closing price on January 21 and a 15.4 percent premium to the price over one month, the statement said.
"The transaction provides a long-term answer to the structural challenges facing Equant on a stand-alone basis," France Telecom said in a statement.
France Telecom's move follows the buyout last year of minority shareholders in Internet provider Wanadoo and the reintegration of its cell-phone unit Orange.
Equant shares were halted limit-up in Paris. By 1004 GMT the shares were up 17.5 percent at 4.23 euros. France Telecom shares were down 1.15 percent at 23.13 euros.
"Delisting Equant is a good idea as the company has long been in a difficult position, burning a lot of cash in a sector with a lot of competition," said an analyst.
Analysts had mixed views on the buyout price.
The ETC Pollak Prebon brokerage said the price was higher than its 3.5 euro valuation for Equant, but CM-CIC Securities said it was below its 4.5 euro valuation, while a third analyst said it topped its fair-value estimate of 3.0 euros. He said the impact on France Telecom would not be significant.
France Telecom said the deal would not change its goal of getting net debt at the end of 2005 below 2 percent of operating income before amortisation and depreciation under French accounting rules. It will also not alter its dividend policy, it said.
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