Deutsche Telekom to Buy 20% of Greek OTE for EUR2.5 Billion
Deutsche Telekom said Monday it is targeting management control in Hellenic Telecommunications Organization (OTE) after buying a 20% stake in the company, but that it doesn't intend to make a tender offer for all of the shares in the company.
In a statement early Monday, Deutsche Telekom said it will buy a 20% stake in the Greek telecoms company for around EUR2.5 billion, confirming what people close to the matter had told Dow Jones Newswires late Sunday.
Under the terms of the deal, Deutsche Telekom will pay Greek private equity company Marfin Investment Group Holdings - which now controls the stake - EUR26 a share for 98.03 million shares in OTE.
The German company also said it will begin talks with the Greek government, OTE's largest shareholder, to raise its stake in OTE further.
However, Deutsche Telekom signaled that it would not launch a general offer for the company and that the deal with MIG won't be executed if no agreement with the Greek government can be reached.
According to Deutsche Telekom Chief Finance Officer Karl-Gerhard Eick, there will be no break-up fee in such a case.
"It's not our intention to make a tender offer for all the shareholders," Chief Financial Officer Karl-Gerhard Eick said in a conference call Monday. Instead, Deutsche Telekom aims to achieve management control of OTE through a shareholders' agreement, Eick said.
Deutsche Telekom Chief Executive Rene Obermann said the Bonn, Germany-based company wants to fully consolidate OTE in its results from 2009 onwards. Obermann said he expects the consolidation will have a positive effect on earnings per share and free cash flow.
The Greek State is the largest shareholder in OTE with a 28.03% stake. For more than a year, the government has been seeking a strategic investor for the company with the aim of reducing its stake. Late last June, the government sold a 10.7% stake in OTE, raising EUR1.1 billion, the centerpiece of its 2007 privatization program.
In a joint statement Monday, Greek Finance Minister George Alogoskoufis and Communications Minister Costis Hadzidakis welcomed the agreement, saying that it is "compatible with the government's strategy for OTE."
The announcement of the deal sent shares in OTE sharply higher, rising 12% in opening trade against a broadly lower market. At 1037 GMT, OTE shares traded up 7.9%, or EUR 1.5, at EUR20.66.
However, Deutsche Telekom shares were lower, down 3.2%, or EUR0.37, at EUR11.05 in an overall lower market.
Analysts mostly welcomed the deal for both parties, but cautioned that the price paid by Deutsche Telekom valued OTE at a significant premium to its European peers.
"At a first glance, the deal, if it materializes, is extremely positive for OTE given the generous premium paid, amid the current gloomy market conditions, and due to the expectations for fat cutting, synergies creation and better exploitation of the assets OTE is sitting on," said Greece's Proton Bank.
But most agreed that OTE would be a good fit for Deutsche Telekom, with both companies active in Southeastern Europe.
OTE, through its mobile subsidiary Cosmote, is active in Albania, Macedonia, Bulgaria and Romania, while parent OTE has a controlling stake in Romtelecom, Romania's former fixed-line monopoly.
Likewise, Deutsche Telekom has investments in Croatia, Bulgaria, Montenegro, Macedonia and Hungary. In each case, it controls, either directly or indirectly, a majority stake in its foreign ventures in the region.
Brokerage LBBW said that deal was the right step for Deutsche Telekom, both from a strategic and financial point of view. In particular, it stressed that OTE's activities in southeastern Europe, particularly its mobile operations in Bulgaria and Romania, would fill in gaps in Deutsche Telekom's Balkan strategy.
-By Archibald Preuschat and Alkman Granitsas, Dow Jones Newswires; +49 (0) 69 29725505; archibald.preuschat@dowjones.com
(Ayse Ferliel in Athens contributed to this article.)
(END) Dow Jones Newswires
Posted to the site on 17th March 2008
