France’s Iliad Group has dropped its attempt to acquire a stake in U.S. operator T-Mobile US, citing a lack of interest from T-Mobile US parent company Deutsche Telekom. Iliad said that the move follows “exchanges” with DT and “selected” T-Mobile US board members “who have refused to entertain” Iliad’s offer.
Above this, Iliad was announcing its intentions while T-Mobile US was in talks about a merger with Sprint that was reported to be at $40 per share, thus hoping to create a true third rival to Verizon Wireless and AT&T, the two largest American cellphone carriers. But T-Mobile CEO John Legere has never publicly confirmed any deal with Sprint whatsoever.
The upstart French telecommunications company was reportedly trying this year to buy control of T-Mobile US, the big American wireless provider, for $15 billion. Iliad’s initial offer included plans to purchase a 56.6% stake in T-Mobile US for the reported $15 billion. DT shot down the offer, which was set at $33 per share, noting later that it was looking at a minimum of $35 per share for a stake in T-Mobile US. At the time of its initial offer, the Iliad was offering a 42% premium over T-Mobile US’ trading price. T-Mobile US’ stock was trading down just over 2% on Monday at around $27 per share.
Iliad said following the dismissal of its first attempt, it had “put in place a consortium of two leading private equity funds and tier-one international banks allowing it to improve significantly the terms” by boosting the cash amount and overall stake to 67%. That offer was valued at $36 per share, in what Iliad called cash and “value creation.” The value creation was to come in terms of more than $2 billion in annual cost savings to T-Mobile US and the creation of “value for both Iliad and T-Mobile US’ shareholders.”
Most likely Iliad’s bid for T-Mobile didn’t make a lot of sense to Deutsche Telekom because there were no synergies involved with a French company taking majority control of a U.S. wireless provider. The German company has to care about the operational management on one hand and potential savings on the other, as it would still have owned a stake in T-Mobile.