Wanadoo, the French internet company spun off by France Télécom this year, has finally ended speculation about the future of Freeserve, the UK internet service provider, by buying it for £1.6bn (€2.6bn) in an all-paper deal.

Wanadoo is offering 0.225 new shares for each Freeserve share, valuing each share at 157p a small premium of 11% over Tuesday's closing price for Freeserve. The offer price is around 85% lower than Freeserve's high of 930p at the peak of the internet bubble in the spring, and is just 4.7% above the issue price for Freeserve's IPO last year of 150p.