[London, ENGLAND] Wanadoo, the Internet arm of France Telecom, announced Wednesday a bid for the entire share capital of Freeserve, the largest Internet service provider in the U.K.

The acquisition values Freeserve at £1,651 million (US $2,360 million), a premium of around 11.2 percent on the closing price Tuesday.

If the offer becomes unconditional in all respects, up to 236.4 million new Wanadoo shares will be issued. The current offer is made on the basis of 0.225 of a new Wanadoo share for each Freeserve share held.

Electrical retailer Dixons, which originated Freeserve and held 80 percent of the equity after spinning off the ISP, will become the second largest shareholder in Wanadoo with a 12.7 percent stake in the enlarged group.

Dixons' directors have accepted the offer, which will now go before a shareholder meeting to be held on January 11, 2001.

Nicolas Dufourcq, chief executive of Wanadoo, said the acquisition was a tremendous step forward for Wanadoo's international growth strategy, making the company the number one ISP provider in two of Europe's top three e-economies.

"The combination of the two management teams will bring significant benefits to the customers of both companies as well as added value to our shareholders," said Dufourcq.

Dufourcq added that the transaction will also benefit France Telecom, Wanadoo's parent company which has ambitions to become one of Europe's Internet leaders.

Freeserve Chief Executive John Pluthero commented that the additional resources of a large international group and a continued relationship with Dixons would create new opportunities and accelerate the development of Freeserve's core business.

Pluthero will join Wanadoo's executive committee once the acquisition is finalized.

Wanadoo currently has around 1.8 million users, and will more than double its base with the addition of Freeserve's 2 million subscribers.