Enlarge imageBy Steve Slater and Kirstin Ridley
LONDON (Reuters) - Mobile phone group mmO2 has been renamed O2 after a corporate restructuring to allow it to pay large shareholders a dividend while buying out almost one million small investors.
Europe’s sixth-largest mobile phone company, which was delisted as mmO2 on Friday and re-listed as O2 on Monday, promptly raised about 375 million pounds in a share placing to fund its minority buy-out plan.
The reorganisation is designed to change O2’s legal status to allow it to pay its first dividend in August as well as streamlining a costly and fragmented shareholder base, which it inherited after demerging from former fixed-line parent BT Group in November 2001.
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O2 sold almost 300 million shares at 125 pence each and confirmed it would pay 833,000 small shareholders 130p per share from March 31. The deal allows private investors to cash in stakes and secure a premium without incurring dealing charges.
"The success of today’s share placing is a promising start for O2 Plc," said Chairman David Arculus, promising remaining investors a sustainable payout policy.
"We will create distributable reserves in order to pay an inaugural final dividend in August 2005 ... and we will pay regular dividends going forward."
SHARES SLIP
The placing, which represents about 3.4 percent of O2’s issued share capital, weighed on the stock. The shares closed down 0.78 percent at 126-3/4p, still at a premium to the placing price.
Shares in O2, which has about 23.2 million subscribers in Britain, Germany and Ireland, have been on a strong, upward trend since last August after the company started upgrading UK revenue forecasts and highlighted growing momentum in Germany.
"It’s an exciting story within the telecoms sector and since its demerger in 2001, it’s had strong operational performance and there’s been a sequence of upgrades. Germany is now the key to further upside," said Christian Maher, analyst at Investec Securities.
Analysts have welcomed O2’s plans to tidy up its shareholder base and reorganise its corporate structure, which will allow it to create distributable reserves.
Under the arrangement, O2 has bought out mmO2 and is offering small investors -- who represent about 63 percent of shareholders but only 3.5 percent of share capital -- either new shares on a one-for-one basis or a cash alternative at 5p over the market price of the stock.
The company is hoping the premium on its cash buyout will win over shareholders who own between up to 1,000 shares, as it says that in many cases the cost of sending dividend cheques would be greater than the actual dividend payments.
O2 has said that shareholders who have not chosen to receive new shares in O2 Plc in exchange for their shares in mmO2 Plc by March 9 will receive the cash alternative.
The company has also delisted in the United States, where it has no operations and said it had no plans to start business, to save on the costs of maintaining a secondary listing.
JPMorgan Cazenove and Merrill Lynch placed 299.5 million shares to fund a cash alternative to smaller shareholders. Analysts at JP Morgan also upgraded their rating on O2 to "overweight" from "neutral", with a price target of 140p.
