£3.5bn price as Orange goes private

MOBILE phone company Orange is facing a second, and probably final, delisting as a public company. Its parent, France Telecom, plans to buy out minority shareholders in a deal that values the company at £3.5 billion, according to senior City sources.

The disappearance of Orange as a public company could come as early as next month and will mark the end of a rollercoaster ride for the firm.

It was floated in 1996 and under former chief executive Hans Snook grew faster than any of its UK rivals.

But in 1999, Mannesmann of Germany bought the company for £20 billion. Vodafone then bought Mannesmann and swiftly sold Orange to France Telecom for £30 billion.

France Telecom floated 13% of Orange on the London and Paris markets in March 2001 in a deal that valued the group at more than £35 billion.

But now Orange is close to paying back a £4.9 billion loan made by France Telecom at the time of the listing to fund the mobile firm's spending, and the parent is anxious to get rid of small shareholders.

Two things are driving the move, according to City sources. With the loan repaid, the only way the state-controlled phone company can get its hands on the cash Orange now generates is by way of a dividend. But dividends are paid from after-tax profit and are hugely inefficient.

If Orange were to become a fully owned subsidiary of France Telecom, the phone company would be entitled to all the cash generated. Also, the French government is under pressure from Brussels to get rid of its 59% stake in France Telecom.

One source said: 'Giving France Telecom shares to investors in Orange in exchange for their holdings would dilute the government's stake and kill two birds with one stone.'

A source familiar with French legal issues agreed with the logic of the plan, but disagreed with the timetable.

He said: ''The French government has started the legislation allowing it to dip below holding 50% of the group, but it could take a year because unions are opposed to privatisation.'