BERLIN, Sept 7 — Deutsche Telekom has struck a US$7 billion (RM29 billion) share-swap deal with SoftBank Group to extend its stake in US unit T-Mobile and bought its Dutch unit in a significant shake-up that strengthens the German group’s transatlantic focus.
As a results of the 2 offers introduced in the present day, Deutsche Telekom will elevate its stake in T-Mobile US by 5.3 per cent to 48.4 per cent, bringing CEO Tim Hoettges nearer to his purpose of securing direct management over the US$170 billion US telecoms operator.
SoftBank will in return obtain money and a 4.5 per cent stake in Deutsche Telekom, establishing a direct shareholding relationship after the Japanese group bought its US Sprint unit to T-Mobile in a deal that closed in early 2020.
The newest transactions search to lock down that deal by bringing Deutsche Telekom inside touching distance of majority possession over T-Mobile US — which accounts for three-fifths of group gross sales and is its most worthwhile unit.
“This is a really enticing transaction for Deutsche Telekom and its shareholders to additional profit from the worth creation potential in T-Mobile US and past,” Hoettges mentioned.
“But we aren’t simply rising our stake in T-Mobile US — we’re welcoming SoftBank as a brand new key investor and strategic companion for Deutsche Telekom.”
As a part of the complicated transaction, Deutsche Telekom will set off choice agreements, enabling it to lock in a median worth of US$109 per share for the 65 million T-Mobile shares it’s buying, under final week’s closing worth of US$136.
For SoftBank founder Masayoshi Son, the share swap deal substitutes a residual stake in the US enterprise for a strategic holding in Deutsche Telekom, which can also be current in a dozen European international locations.
SoftBank is buying and selling T-Mobile shares whose worth was pegged below the choice offers for future upside in Deutsche Telekom shares that Marcel Claure, its lead govt on the deal, mentioned have been “considerably undervalued”.
“I’m an enormous believer that Deutsche Telekom inventory has materials upside,” Claure advised a information briefing, additionally highlighting potential collaboration in areas equivalent to digital funds, the place SoftBank has broad publicity.
SoftBank has agreed to not promote its Deutsche Telekom shares earlier than the top of 2024.
Shares in SoftBank, which is the world’s greatest tech investor by its Vision Fund portfolio, rallied 10 per cent on the information in Tokyo, whereas Deutsche Telekom rose 1.1 per cent in Frankfurt.
“We consider the deal worth to Deutsche Telekom is advantageous,” mentioned Jefferies analyst Ulrich Rathe, pointing to the 20 per cent low cost on T-Mobile shares.
Separately, Deutsche Telekom bought its Dutch unit T-Mobile Netherlands to a consortium of personal fairness homes Apax and Warburg Pincus for €5.1 billion (RM25 billion).
Warburg Pincus’ lead govt on the deal is Rene Obermann, a former Deutsche Telekom CEO. Apax Partner Gabriele Cipparrone mentioned it match with its technique of “investing in progressive firms with strong fundamentals and robust progress prospects.”
Deutsche Telekom acquired management of the Dutch enterprise from Sweden’s Tele2 in 2018 however by no means thought-about the unit, which ranked a distant third behind KPN and Vodafone Ziggo, as a core asset.
It will make investments a few of its €3.8 billion = in proceeds from the Dutch deal to boost its stake in T-Mobile US. Sweden’s Tele2, which had retained a 25 per cent stake in T-Mobile Netherlands, additionally bought out.
Following the Sprint deal, Deutsche Telekom had below a shareholder settlement held the suitable to forged votes on SoftBank’s residual stake in T-Mobile US. It additionally struck choice offers with SoftBank locking in the suitable to boost its stake in T-Mobile US.
Still, with Deutsche Telekom carrying a debt load of practically €130 billion, the extent of its present leverage meant it was at all times going to be exhausting to pay money to achieve majority management over T-Mobile US.
Under the share swap deal, Deutsche Telekom will difficulty 225 million new shares valued at 20 euros — 12 per cent above their present market worth — to SoftBank.
In return, SoftBank will promote round 45 million T-Mobile US shares to Deutsche Telekom at a median worth of US$118 per share. Deutsche Telekom will purchase an extra 20 million shares in T-Mobile US from SoftBank with US$2.4 billion of the proceeds from the Dutch sale.
The common buy worth over the complete transaction, reflecting the premium on the share swap and the reinvestment of proceeds, works out at US$109 per share, Deutsche Telekom mentioned.
Hoettges mentioned Deutsche Telekom had a variety of choices to raise its stake in T-Mobile US over 50 per cent, for instance by not collaborating in multibillion-dollar share buybacks deliberate by the US firm.
He reiterated Deutsche Telekom’s medium-term steering, up to date at a current capital markets day, that adjusted earnings per share would attain €1.75 in 2024 in comparison with €1.20 final yr. — eNM