Telef贸nica confirms deal to buy E-Plus for $6.6 billion and create Germany’s largest operator

Telef贸nica confirms deal to buy E-Plus for $6.6 billion and create Germany’s largest operator

Telef贸nica鈥檚 much-rumored pursuit聽of fellow operator聽E-Plus 鈥 Dutch telecom firm KPN鈥檚 German subsidiary 鈥斅爃as reached a conclusion after the Spanish telecoms company announced that a deal worth 鈧5 billion ($6.6 billion) has been agreed.

Telef贸nica will merge E-Plus with its existing business in Germany 鈥斅燭elef贸nica Deutschland 鈥 to create the country鈥檚 largest operator and second biggest in Europe based on subscriber numbers. Under the terms agreed, a two-phase investment process will see Telef贸nica eventually take up a 65 percent stake in the new company, with KPN allocated a 17.6 percent share and the remainder left as free float.

The coming together of the two businesses will take the new company past current market leaders Vodafone and T-Mobile. In total, it will have a cumulative base of 43 million customers, which equates to a dominant market share of nearly 40 percent of Germany鈥檚 mobile phone users.聽Not to mention that the new entity will have聽combined revenues of around 鈧8.6 billion 鈥 boosted by estimated cost savings of up to $5.5 billion thanks to shared infrastructure, resources and services.

The deal has been on the cards for as long as a decade. While difference of opinion put pay to a deal in the past, both sides were said to have opened fresh talks in April 2013.

The acquisition will be subject to the regulatory gaze of the European Union but, all being well, it is expected to go through in聽the first half of 2014.

Further details聽of the phrases of the deal are as follows:

The transaction is divided into two phases. In the first phase, Telef贸nica Deutschland will acquire 100% of E-Plus for 鈧3.7 billion euros in cash and a stake of 24.9% in the combined entity. This cash payment will be financed via a rights issue for 3.7 billion euros, of which, Telef贸nica S.A. will subscribe 76.8%, in proportion to its聽current stake, corresponding to 2.84 billion euros.

In the second phase, Telef贸nica S.A. will acquire from KPN a stake of 7.3% in the combined entity for a total of 1.3 billion euros. As a result, Telef贸nica SA and KPN will hold 65% and 17.6% of Telef贸nica Deutschland, respectively, while the remaining percentage will be free float. Therefore, of the 5 billion euros paid in cash to KPN, the total amount required by Telef贸nica S.A to finance this operation equals 4.14 billion euros.

KPN says it will shift its focus to Belgium and the Netherlands following the deal.

Headline image via Thinkstock

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