Getting the deal done

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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