France Telecom has offered to buy MobilCom CEO Gerhard Schmid’s stake in the company he founded, after months of high profile disagreement between the German mobile operator’s two largest investors. The French telco believes it can structure the deal so that it does not have to pay cash and is not forced to bid for the whole company.
If Orange bought Mr Schmid’s stake outright, this would trigger a full bid for MobilCom, forcing Orange to buy minority investors’ shares and forcing France Telecom to include MobilCom’s debt on its balance sheet. This would undermine its debt reduction plans.
So rather than paying cash, France Telecom hopes to swap shares in its Orange mobile unit for Mr Schmid’s MobilCom shares. And rather than being held by Orange, the MobilCom shares may then be held by banks acting on France Telecom’s behalf.