The agreement will be financed by a combination of debt and new shares. The company said it plans to raise £1 billion through a placing of new shares to fund the deal.
Deutsche Telecom will hold a 12% stake in BT and a seat on the board. Orange will receive a 4% stake, along with £3.4 billion in cash.
Existing EE shareholders Orange and Deutsche Telekom will sell 100% of their shares.
“This is a major milestone for BT as it will allow us to accelerate our mobility plans and increase our investment in them,” said Gavin Patterson, BT’s CEO.
“The deal provides an attractive opportunity for BT to generate considerable value for shareholders, with significant operating and capital investment efficiencies supported by our tried-and-tested cost transformation activities. The enlarged BT will offer significant opportunities for employees as we lead the creation of a world-class digital infrastructure for Britain.”
The company said that it expects to save £360 million a year on operating costs and capital expenditure within four years. In addition, it expects the combined entity to generate an additional £1.6 billion a year in sales.
The deal is expected to be finalised by March 2016, subject to approval by shareholders of BT and the Competition and Markets Authority.
