With this transaction Telefónica Deutschland Holding AG will become a leading telecommunications company in Germany with combined revenues of €8.3 billion (end of 2012). "Both companies have a reputation in Germany as fast-moving innovators that consistently challenge the market with exciting new products and services. This will continue to be the core strategy of the enlarged company," says René Schuster, CEO Telefónica Deutschland Holding AG. "Customers will benefit from a comprehensive range of telecommunication services."
The enlarged company will be very well positioned to build one of the most modern high-speed networks in Germany. Various well established brands, the right infrastructure for fixed and mobile offers and a strong customer base will enable Telefónica Deutschland to further accelerate its growth strategy in a highly competitive market. With these assets the company will be well placed to deliver great experiences for all customers.
"This transaction is a strong commitment to the German market and a significant step in Telefónica's growth story - providing us with a leading position within the strongest economy in Europe," says Eva Castillo
, Chairperson of the supervisory board of Telefónica Deutschland Holding AG and CEO of Telefónica Europe plc. "It also recognises the need for in-market scale and the transformation required to assure a sustainable, vibrant and strong telecoms industry within Europe. Telefónica remains committed to providing the best experiences to well over 100m customers in Europe and to playing a proactive role in helping to restore growth and opportunities within Europe."
The transaction provides significant synergy potential in particular with respect to distribution, customer service and network, with incremental value from additional revenue and other synergies. The total value of synergies expected from the transaction is estimated to €5.0 - 5.5bn net of integration costs.
Under the terms of the intended acquisition, E-Plus will become a wholly-owned subsidiary of Telefónica Deutschland. As consideration KPN will receive €3.7bn in cash and an initial stake of 24.9% in Telefónica Deutschland. The cash consideration to KPN will be financed entirely via a fully underwritten rights issue. Telefónica S.A. will subscribe this rights issue proportionately to its current shareholding in Telefónica Deutschland. No new debt will be raised at the level of Telefónica Deutschland, which is consistent with the company's target to maintain a low leverage level.
Upon closing of the transaction Telefónica S.A. will acquire a stake of 7.3 percent from KPN leading to a holding of Telefónica S.A. and KPN in Telefónica Deutschland of 65.0 percent and 17.6 percent, respectively, while 17.4 percent will be free float.
The transaction will be submitted to both sets of shareholders for approval, including the resolution of the necessary capital increases at Telefónica Deutschland and will be subject to merger clearance and other closing conditions customary for a deal of this kind and size. The transaction is expected to close in mid 2014.