* Deal brings German group closer to U.S. majority
* Japan's SoftBank secures minority stake in D.Telekom
* D.Telekom reinvests proceeds of Dutch sale in T-Mobile US
* Deals follow T-Mobile takeover of Sprint last year
(Adds source on potential follow-up deal, link to
Breakingviews)
By Douglas Busvine and Tim Kelly
BERLIN/TOKYO, Sept 7 (Reuters) - Deutsche Telekom
has struck a $7 billion share-swap deal with SoftBank Group
to increase its stake in U.S. unit T-Mobile
and sold its Dutch unit in a major shake-up that strengthens the
German group's transatlantic focus.
As a result of the two deals announced on Tuesday, Deutsche
Telekom will raise its stake in T-Mobile US by 5.3% to 48.4%,
bringing CEO Tim Hoettges closer to his goal of securing direct
control over the $170 billion U.S. telecoms operator.
SoftBank will in return receive cash and a 4.5% stake in
Deutsche Telekom, establishing a direct shareholding
relationship after the Japanese group sold its U.S. Sprint unit
to T-Mobile https://www.reuters.com/article/us-sprint-corp-m-a-t-mobile-us-idUSKBN1I00PH
in a deal that closed in early 2020.
The latest transactions seek to lock down that deal by
bringing Deutsche Telekom within touching distance of majority
ownership https://www.reuters.com/article/uk-deutsche-telekom-agm-idUKKBN2BO4XA
over T-Mobile US - which accounts for three-fifths of group
sales and is its most profitable unit.
"This is a very attractive transaction for Deutsche Telekom
and its shareholders to further benefit from the value creation
potential in T-Mobile US and beyond," Hoettges said.
As part of the complex transaction, Deutsche Telekom will
trigger option agreements, enabling it to lock in an average
price of $109 per share for the 65 million T-Mobile shares it is
acquiring, below last week's closing price of $136.
Deutsche Telekom had options to lift its stake in T-Mobile
US above 50%, Hoettges told a briefing, either by exercising
further options or sitting out the $60 billion in share buybacks
that the U.S. company plans in the coming years.
Potential proceeds from a deal to sell its telecoms
infrastructure unit, which is worth 15-20 billion euros
$17.8-$23.7 billion), could also be deployed in pursuit of that
goal as early as 2022, said one person close to the matter.
For SoftBank founder Masayoshi Son, the share swap deal
substitutes a residual stake in the U.S. business for a
strategic holding in Deutsche Telekom, which is also present in
a dozen European countries.
"I'm a big believer that Deutsche Telekom stock has material
upside," said SoftBank's chief operating officer, Marcel Claure,
highlighting potential collaboration in areas such as digital
payments, where SoftBank has broad exposure.
SoftBank has agreed not to sell its Deutsche Telekom shares
before the end of 2024.
Shares in SoftBank, the world's biggest tech investor
through its Vision Fund portfolio, rallied 10% on the news in
Tokyo, while Deutsche Telekom erased initial gains to trade
little changed.
DUTCH EXIT
Separately, Deutsche Telekom sold its Dutch unit T-Mobile
Netherlands to a consortium of private equity houses Warburg
Pincus and Apax for 5.1 billion euros ($6.1 billion).
Warburg Pincus' lead executive on the deal, Rene Obermann, a
former Deutsche Telekom CEO, said he would support the unit's
expansion of ultra-fast wireless internet by investing in people
and next generation networks.
"The wireless revolution has only just begun," he said.
Deutsche Telekom acquired control of the Dutch business from
Sweden's Tele2 in 2018 but never considered the unit,
which ranked a distant third behind KPN and Vodafone
Ziggo, as a core asset.
It will invest some of its 3.8 billion euros in proceeds
from the Dutch deal to raise its stake in T-Mobile US. Tele2,
which had retained a 25% stake in T-Mobile Netherlands, also
sold out.
Following the Sprint deal, Deutsche Telekom had under a
shareholder agreement held the right to cast votes on SoftBank's
residual stake in T-Mobile US. It also struck option deals with
SoftBank locking in the right to raise its stake in T-Mobile US.
Still, with Deutsche Telekom carrying a debt load of nearly
130 billion euros, the extent of its existing leverage meant it
was always going to be hard to pay cash to gain majority control
over T-Mobile US.
Under the share swap deal, Deutsche Telekom will issue 225
million new shares valued at 20 euros - 12% above their current
market price - to SoftBank.
In return, SoftBank will sell around 45 million T-Mobile US
shares to Deutsche Telekom at an average price of $118 per
share. Deutsche Telekom will buy a further 20 million shares in
T-Mobile US from SoftBank with $2.4 billion of the proceeds from
the Dutch sale.
The average purchase price over the entire transaction,
reflecting the premium on the share swap and the reinvestment of
proceeds, works out at $109 per share, Deutsche Telekom said.
The sale of T-Mobile Netherlands followed a deal to sell
Deutsche Telekom's Dutch telecom towers assets to Spanish
infrastructure specialist Cellnex.
A similar deal for its main towers unit Deutsche Funkturm is
one likely route to raising fresh funds, while a stake sale to
an infrastructure investor or an initial public offering are
further options, the person close to the matter said.
Hoettges reiterated Deutsche Telekom's medium-term guidance,
updated at a recent capital markets day https://www.reuters.com/technology/deutsche-telekom-targets-3-5-profit-growth-through-2024-2021-05-20,
that adjusted earnings per share would reach 1.75 euros in 2024
compared to 1.20 euros last year.
Goldman Sachs and Morgan Stanley advised Deutsche Telekom on
the deal.
($1 = 0.8425 euros)
(Additional reportig by Arno Schuetze in Frankfurt, Toby
Sterling in Amsterdam, Simon Johnson in Stockholm and Ritsuko
Ando in Tokyo
Editing by Kim Coghill and Mark Potter)
Vodafone (VOD)