United Internet Said Near Deal for German Mobile Firm Drillisch

(Bloomberg) -- Online services provider United Internet AG is in advanced talks about a deal that would help it gain control of German wireless operator Drillisch AG, according to a person familiar familiar with the matter, as it seeks to better compete with larger rivals Deutsche Telekom AG and Vodafone Group Plc.

The multi-step transaction would include a merger between Drillisch and a United Internet subsidiary, said the person, who asked not to be identified because talks are private. Drillisch would issue shares as part of the deal, the person said. As a result, United Internet’s current stake of more than 20 percent in Drillisch would then go above the 30 percent threshold, triggering a mandatory takeover offer for the rest of Drillisch’s shares, the person said.

Drillisch has a market value of 2.66 billion euros ($2.89 billion), while United Internet is currently worth about 8.76 billion euros. An agreement could be announced as early as this week, though details of the transaction are still being negotiated and talks could falter, the person said.

United Internet agreed in April 2015 to boost its Drillisch stake to 20.7 percent, making it the Maintal, Germany-based company’s largest shareholder. While United Internet said at the time it didn’t plan to go above 30 percent, the move triggered speculation of an eventual full takeover.

Representatives for United Internet and Drillisch didn’t immediately answer phone calls outside regular business hours in Germany.

Taking control of Drillisch would make United Internet the No. 4 wireless operator in Germany, marking one of the final steps of consolidation in the industry after Telefonica SA’s 8.55 billion-euro purchase of Royal KPN NV’s E-Plus unit in 2014. The companies agreed to divest spectrum to get regulatory approval at the time, which provided an opening for smaller players to grab a larger share of the market. 

Drillisch and Montabaur, Germany-based United Internet both offer wireless service to customers via the networks of the country’s larger operators.

To contact the reporters on this story: Aaron Kirchfeld in London at akirchfeld@bloomberg.net, Ben Scent in Hong Kong at bscent@bloomberg.net.

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, Timothy Sifert