Telefónica in talks to buy KPN German’s unit for $6bn
July 22, 2013 3:11 pm
Telefónica in talks to buy KPN German’s unit for $6bn
By Daniel Thomas and Anousha Sakoui
Telefónica is in advanced talks about a deal to buy E-Plus, KPN’s German operations, in a deal that would value the combined entity at €16bn. The deal could may be announced as soon as today.
The details of the deal are still being negotiated, according to two people close to the situation. One person cautioned that there was no certainty of a deal being struck although talks were progressing. Board meetings are said to be taking place this afternoon.
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Under one structure being discussed, Telefónica would buy E-Plus from KPN, which in turn would get a small stake in Telefónica Deutschland, two people close to the situation said.
Telefónica will end up with a stake of more than 50 per cent in the combined entity, two of the people said. The deal is said to have the backing of Carlos Slim, KPN’s largest shareholder, one of the people said.
The deal has been discussed between Telefónica and KPN for close to a decade, but the two management teams have never struck an agreement over value or shareholder size, amid what has become a bitter fight for customers in the German mobile market.
The transaction may be financed partly in equity and cash, the people said.
Two people said that Telefónica would pay about $6bn, with the enterprise value of the merged business at about €16bn.
In April, the FT revealed Telefónica had reopened talks with KPN to explore ways to bring together their German businesses in an effort to cut costs for the two heavily indebted European telecoms operators.
Those close to the situation said that there is a risk that the combination of these two German operations will be blocked by the EU competition authority, which has been wary of allowing in-market consolidation. However, the two sides are likely to offer concessions to allow the transaction to go ahead.
Analysts at Citi have estimated that the synergies could be worth more than €4bn for a merger, with a share price boost from a potential merger in Germany of 32 per cent for KPN and 30 per cent for Telefónica Deutschland, which is partially listed.
Telefónica and KPN declined to comment