media information: Deutsche Telekom increases its ownership stake in T-Mobile US
Deutsche Telekom increases its ownership stake in T-Mobile US by 5 percent by 2022 while SoftBank becomes new shareholder and strategic partner
- Deutsche Telekom to issue 225 million new Deutsche Telekom shares at 20 euros per share to SoftBank in exchange for approx. 45 million T-Mobile US shares from SoftBank at an average price of 118 U.S. dollars per share
- SoftBank will become second largest private shareholder in Deutsche Telekom with 4.5 percent ownership
- In addition, Deutsche Telekom intends to purchase an additional approx. 20 million T-Mobile US shares from SoftBank using part of the proceeds of the announced sale of T-Mobile NL
- Translates into Deutsche Telekom increasing its ownership stake in T-Mobile US by 5.3 percent to 48.4 percent by acquiring a total of approx. 65 million T-Mobile US shares from SoftBank
- Deutsche Telekom and SoftBank enter into a strategic partnership including investment collaboration as well as commercial and technological cooperation
- Deutsche Telekom reiterates its medium-term financial outlook
Deutsche Telekom AG (“Deutsche Telekom”) and SoftBank Group Corp. (“SoftBank”) today announced that they have entered into an agreement through which Deutsche Telekom increases its ownership stake in T-Mobile US Inc. (“TMUS”) in a two-fold transaction by 5.3 percent from 43.2 percent to 48.4 percent. This agreement furthers Deutsche Telekom’s strategic objective of increasing its ownership stake in TMUS to more than 50 percent in order to maintain long-term control and consolidation of TMUS.
As a consequence of the increased stake in T-Mobile US Deutsche Telekom enhances its participation in T-Mobile US’ strong earnings, cash flow and value creation momentum. Furthermore, Deutsche Telekom increases its share in the announced TMUS shareholder remuneration of up to 60 billion U.S. dollars from 2023-25.
Deutsche Telekom reiterates its 2021 Capital Market Day ambitions, including guidance for 2024 adjusted earnings per share (EPS) of greater than 1.75 euros.
Under a share swap agreement Deutsche Telekom will exercise a portion of its call options that were granted by SoftBank in connection with their June 2020 agreement. Deutsche Telekom will acquire approx. 45 million TMUS shares from SoftBank in exchange for issuing 225 million new Deutsche Telekom shares to SoftBank from its authorized capital. As a result of the share swap, SoftBank will become a 4.5 percent shareholder in Deutsche Telekom.
As part of the agreement with SoftBank in June 2020, Deutsche Telekom received call options on approx. 101 million of SoftBank’s TMUS shares, of which approx. 44.9 million call options have a fixed strike price of 101.46 U.S. dollars and approx. 56.6 million have a floating strike price. Under the share swap agreement, Deutsche Telekom will exercise approx. 26 million of these fixed price options and approx. 19 million of these floating price options at a strike price of 140.60 U.S. dollars (20-day volume-weighted average price of TMUS), resulting in an average price of approx. 118 U.S. dollars for the approx. 45 million TMUS shares acquired. This represents a discount of 13 percent to the TMUS closing share price of 136 U.S. dollars on September 3, 2021.
In exchange for the approx. 45 million TMUS shares Deutsche Telekom will issue 225 million new Deutsche Telekom shares from its authorised capital to SoftBank valued at 20 euros per share – a 12 percent premium on the Deutsche Telekom closing share price of 17.80 euros on September 3, 2021. As a result of this capital increase, Deutsche Telekom’s share capital will increase from 4.761 billion shares to 4.986 billion shares. SoftBank will become an approx. 4.5 percent shareholder in Deutsche Telekom. The agreement enables SoftBank to use its Deutsche Telekom shares as collateral for financing and hedging purposes. Any such transaction would be consistent with a long-term partnership and SoftBank will retain significant exposure to Deutsche Telekom’s share price.
As part of the agreement, Deutsche Telekom’s management will support efforts to have Marcelo Claure, Corporate Officer, Executive Vice President & Chief Operating Officer of SoftBank Group Corp. and Chief Executive Officer of SoftBank Group International elected to the Supervisory Board of Deutsche Telekom.
The share swap has been approved by the Supervisory Board of Deutsche Telekom and the Board of Directors of SoftBank and is expected to close and become effective by incorporation in Deutsche Telekom’s commercial register by October 2021.
In a subsequent step, Deutsche Telekom envisages re-investing up to 2.4 billion U.S. dollars of 3.8 billion euros expected proceeds from the announced sale of T-Mobile NL into exercising further call options. This part of the transaction comprises approx.12 million fixed price options plus approx. 8 million floating price options representing approx. 1.6 percent of TMUS’ share capital.
The effective price across both transactions – the share swap at a premium and the re-investment of proceeds – would be 109 U.S. dollars per TMUS share.
With completion of both transactions Deutsche Telekom is increasing its ownership stake in TMUS by 5.3 percent to 48.4 percent, while SoftBank would retain a 3.3 percent ownership in TMUS.
Deutsche Telekom and SoftBank have also reached a general agreement to form a new strategic partnership whereby Deutsche Telekom will become a key European partner in the SoftBank ecosystem. Both parties are strongly committed to Deutsche Telekom’s 2030 Digital Telco Vision and see other highly attractive benefits of the strategic partnership, including the opportunity to jointly drive ecosystem synergies by leveraging Deutsche Telekom’s and TMUS’ customer reach, digital platforms, retail stores and brand for SoftBank portfolio companies in Europe and the United States. As a global investment holding company with stakes in telecommunications, internet services, AI, smart robotics, IoT and clean energy technology providers, among others, SoftBank will be a strong partner to Deutsche Telekom for the execution of joint investments and the expansion into new services. Furthermore, SoftBank and Deutsche Telekom will cooperate in scaling and investing in global connectivity platforms, with a focus on enterprise customers in areas such as IoT. Both partners are also exploring an investment collaboration between SoftBank portfolio companies and DTCP.
“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. But we are not just increasing our stake in T-Mobile US – we are welcoming SoftBank as a new key investor and strategic partner for Deutsche Telekom. I am thrilled by the value creation potential of this cooperation for both SoftBank and Deutsche Telekom,” said Timotheus Höttges, Chief Executive Officer, Deutsche Telekom.
“This is a landmark transaction that is a true win-win-win for our portfolio companies, SoftBank and Deutsche Telekom,” said Marcelo Claure. “The long-term strategic partnership will create incredible opportunities for our portfolio companies to turbocharge their growth with access to approximately 300 million customers across Japan, Europe and the United States in total. The transaction diversifies our telecoms exposure and results in SoftBank becoming Deutsche Telekom’s second largest private shareholder, while retaining meaningful exposure to high-growth T-Mobile US. It also marks a decisive step for Deutsche Telekom towards their stated objective of acquiring a majority stake in T-Mobile US, and the addition of the world’s largest technology investor in SoftBank validates their Telco 2030 vision and demonstrates the “Magenta Advantage”. I look forward to partnering with Tim and team long into the future.”
In the context of the strategic partnering agreement, SoftBank’s concrete first steps have already been taken in the area of joint global platform investments, with SoftBank pursuing a co-investment alongside Deutsche Telekom in 1nce, the leading, cloud-native IoT connectivity platform, as well as joint investment collaboration with SoftBank committing 50 million U.S. dollars in capital to DTCP Growth Equity III funds alongside Deutsche Telekom. In the area of ecosystem synergies based on “Magenta Advantage”, SoftBank and Deutsche Telekom are working on concrete partnership agreements that will provide access to Deutsche Telekom’s digital touchpoints and shops for SoftBank portfolio companies. This will create a “win-win-win”: for the portfolio companies with faster growth at lower cost, for SoftBank with an enhanced valuation of these assets and for Deutsche Telekom with an enhanced offering portfolio, potential average revenue per user upside and lower churn.
Goldman Sachs and Morgan Stanley acted as financial advisors to Deutsche Telekom on this transaction. Cravath, Swaine & Moore LLP and Freshfields Bruckhaus Deringer acted as legal advisors.
All of the above shareholdings are calculated on the basis of basic shares outstanding of T-Mobile US.
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