France Telecom drops bid for Sweden’s TeliaSonera, sees shares rise 13 per cent

After an entire month of haggling, Paris-based France Telecom today finally withdrew its proposal for a $42 billion takeover bid for TeliaSonera, which would have created Europe's largest telecommunications company. This announcement comes within ten days of a declaration that gave the glimmer of a better deal for the Stockholm-based entity. (See: France Telecom may sweeten bid for TeliaSonera, but only just)

"Notwithstanding the interest shown in the project, the dialogue opened with the board of directors of TeliaSonera was unable to reach agreement on its financial conditions," France Telecom said in a statement. It argued a purchase of TeliaSonera was "not essential to the pursuit of its strategy".

When France Telecom made its informal offer on 5 June, Stockholm-based TeliaSonera's board unanimously rejected it as too low. France Telecom had offered $9.36 a share, which would have valued TeliaSonera at about $42 billion.

"As the terms and conditions have not been significantly improved, the board of TeliaSonera maintains its view that the proposal substantially undervalues the company," TeliaSonera said in a statement today.

TeliaSonera chairman Tom von Weymarn said in a statement the firm had "excellent growth prospects" in its own right. "The board and management are focused on developing the company to its full potential, driving strong and sustainable earnings growth and maximizing value for all shareholders," he said.

TeliaSonera shares dropped 13 per cent to 43.30 Kronor, while France Telecom shares jumped 7.3 per cent.

Sweden's initial public offering in 2000 of Telia - which later merged with Finland's Sonera - ended up losing thousands of Swedish investors' money after the shares tumbled during the bursting of the dot-com bubble. Sweden, which owns 37.3 per cent, analysts say, needed a price that at least matched the IPO terms - a level closer to 60 to 65 Kronor rather than the 54 to 55 area that the French offer represented.

Swedish government officials were not immediately available for comment. Finland, which owns 13.3 per cent of TeliaSonera, said it agreed with the TeliaSonera board's statement. The cash portion made up 52 per cent of the offer. But France Telecom, according to media reports, had been willing to increase the cash portion of the bid.