Jazztel/Orange unfazed by shareholder rebellion
Demands by some Jazztel [MCE:JAZ] shareholders for a higher price from Orange [EPA:ORA] are unlikely to flourish, according to sources from both camps.
Orange’s price of EUR 13 per share is a “significant” premium over historical levels, said a source close to the Spanish internet provider. In the last five years, the company’s shares have only gone above EUR 12 at the time of Orange’s bid. The shares were trading below EUR 4 as recently as 2011.
The fact that Jazztel's chairman and main shareholder, Leopoldo Fernandez Pujals, has decided to cash out after 10 years at the helm will also be influential for minority shareholders, the source predicted. The Cuban-American entrepreneur began a turnaround strategy for the Spanish alt-net in 2004.
Orange is also bullish on the chances of the bid going through at the current price. Any shareholder who fails to tender would be “foolish,” said one source familiar with the French company’s thinking.
Orange is only seeking 64.51% of the capital, including the 14.5% already pledged by Pujals. The offer is designed so that Orange can merge its Spanish business with Jazztel, keeping the company’s stock market listing, the source said.
To merge its Spanish business with Jazztel, Orange will need to pass an extraordinary resolution. Under Jazztel’s corporate statutes, extraordinary resolutions need 75% of the votes at a shareholder meeting.
Orange has previously studied an initial public offer (IPO) for its Spanish business, said the source familiar with its thinking. But, given that Jazztel uses Orange’s mobile network, buying the company and keeping its listing is an elegant solution, the source said.
It appears that rebellious shareholders control 10% or less than the capital at this stage of the game, said one person familiar with the issue. By contrast, at least 30% of the capital is in the hands of hedge funds who bought at less than EUR 13 per share, the person said, adding that this proportion could be significantly higher.
Jazztel minority shareholder Alken made headlines when it valued the company at EUR 20 per share. The investor raised its stake to 6.5% at the end of September.
At the same time, other significant shareholders, including Fidelity, appear to have been reducing their stakes. Spain’s National Securities Market Commission (CNMV) no longer lists any other shareholders as holding more than 3%, the level for notification. There is a clear trend for long-time shareholders to cash out early, the person said.
A spokesperson for Jazztel declined to comment. Alken declined to discuss the situation.