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KPN Sells German Subsidiary for EUR 5 Billion

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As widely leaked yesterday, Dutch KPN has announced a deal to sell its German subsidiary, E Plus to Telefonica's O2 Germany

KPN is to receive EUR5 billion in cash, which is to be used to pay down its debt, and KPN will also receive a 17.6% stake in the merged company.

KPN said that the transaction will unlock estimated synergies of EUR 5-5.5 billion.

Eelco Blok, CEO of KPN said "The opportunity to unlock significant value in Germany by selling E-Plus is clear and compelling. The significant premium embedded in the sale price recognizes the substantial operational synergies."

He added that going forward, KPN will focus on its core geographies.

Under the terms of the deal, KPN will sell E-Plus to Telefónica Deutschland for EUR 3.7 billion in cash and newly issued shares in Telefónica Deutschland, representing 24.9% of the share capital.

Telefónica Deutschland will finance the EUR 3.7 billion cash component of the transaction through a rights offering. Simultaneously, Telefónica will then buy a 7.3% stake in Telefónica Deutschland from KPN for a cash consideration of EUR 1.3 billion.

KPN's remaining interest of 17.6% in Telefónica Deutschland will be subject to a lock-up period of 180 days.

Based on a fair value of EUR 8.1 billion, KPN expects to recognize a loss of EUR 1.3 billion in Q3 2013, when E-Plus is recognized as 'disposal group held for sale'. This loss relates to the deferred tax assets that in the transaction have a lower fair value than their book value.

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Tags: kpn  telefonica  o2  e-plus  Germany