Spanish telecoms company Telefónica’s £17.7 billion ($30.3 billion) offer for mobile operator O2 – the largest all-cash takeover offer ever in Europe – has led to speculation that the latest round of M&A might lead telcos to gear up to the destructive levels last seen in 2001. However, analysts expect greater caution and less leveraging from others in the sector on the acquisition trail.
Telefónica stunned the market in October with its takeover bid for O2, offering shareholders a 22% premium for their stakes in the wireless service provider. The company plans to fund the offer entirely with bank debt, followed by a public bond offering. It also takes the company’s pro forma debt to ebitda up to 3.6 times, versus an expected 2.3 times in 2005, according to independent research firm Gimme Credit. ...
