Iliad's Fairytale Bid for T-Mobile at Least $10 Billion Light

Updated from 12:50 p.m. ET to include analyst comments, closing share prices.

NEW YORK (TheStreet) -- The Wall Street Journal has a great scoop on French telecom Iliad's bid to buy U.S. carrier T-Mobile (TMUS). The only problem is they don't know how the company would pay for what would likely be about a $25 billion takeover.

Now we know, Iliad confirmed its bid on Thursday and said it would offer $15 billion in cash for 56.6% of T-Mobile at $33 a share and would pay for the remaining 43.4% of T-Mobile at $40.50 a share on the basis of $10 billion in synergies, leading to an overall share price of $36.20 a share.

Where to start? 

First off, that cash component isn't coming from Iliad's coffers. The company plans to finance its $15 billion cash bid with debt and equity.  Iliad CEO Xavier Niel expects to participate in a 2 billion euro equity offering, with the remainder of the $15 billion cash component financed with debt raised by unspecified "international banks." That's pretty much all Iliad is offering.

The rest of the deal comes in the form of a $10 billion offer of $40.5 in synergy per share for 43.4% of T-Mobile's stock. Put another way, Iliad is offering $0 in cash or stock for 43.4% of T-Mobile, and promising synergy of nearly all of T-Mobile's 2013 operating expense.

Ultimately, Iliad is seeking a controlling stake in T-Mobile without paying a premium. It is then offering an extremely high projection of synergy, especially given that the company acknowledged there is limited overlap between the two telecoms. Perhaps those are revenue synergies and not operating synergies?

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