Getting the deal done

The spectacle of France Telecom’s short put position on mobile telephone operator Orange going badly awry last month highlighted the dangers of using equity derivatives to sweeten a share-financed acquisition. The French group reportedly suffered a book loss of around E375 million when German utility Eon exercised a put, forcing France Telecom to buy Eon’s 2.1% stake in Orange for about E1 billion – at a strike price 65% higher than spot.

Clearly, when France Telecom gave Eon the option durin