Orange has confirmed that it has made an offer to buy Spanish fixed line telecoms provider Jazztel in a deal worth up to €3.4bn (£2.7bn; $4.4bn), subject to regulatory approval and at least 50.01 percent of Jazztel's shareholders giving the deal the go-ahead.
Orange's offer of €13 per share represents a 34 percent premium on Jazztel's average closing price over the last 30 days, Orange said in a statement.
If the deal goes through, it will give Orange a huge boost in the Spanish telecoms market. It is currently the third biggest supplier of home broadband in the country, behind Telefonica’s Movistar brand; acquiring Jazztel would see Orange move ahead of Vodafone into second place.
As Jazztel also resells mobile services, the deal would give Orange a leg-up in the mobile market too, enabling it to add Jazztel's 1.5 million mobile customers to its own 11.4 million. However, the combined company would remain in third place in Spain's mobile market behind Movistar and Vodafone.
It's likely to be Jazztel's strength in bundled service packages that made it such an attractive takeover target. Its bundled offerings of home broadband, television, and fixed and mobile phone services have grown in popularity over the past few years as consumers in Spain looked for more cost-effective telecoms deals during the recession.
An acquisition of Jazztel has been rumoured since rivalback in March for €7.4bn, leaving Orange as the only large telecoms provider without a fixed-line offering.
Quoted by Reuters, Orange CEO Stephane Richard said: "We are doing this deal to accelerate our growth in Spain, particularly in fixed-mobile convergent offers. The new company will be the incontestable number two in fixed services and third in mobile behind Vodafone, but we think we'll be able to take second-place pretty quickly."
Earlier this week Jazztel confirmed it was in very early discussions with TeliaSonera over the acquisition of its Spanish subsidiary Yoigo. However, according to Reuters, those talks will be called off as part of the Orange takeover.
Orange said that it expects the deal will save it €1.3bn, primarily due to "savings in operational expenditure and investments in networks". It will raise capital for the deal through issuing new shares.