Deutsche Telekom Said in Talks for SoftBank’s T-Mobile Stake
(Bloomberg) -- Deutsche Telekom AG is in talks about a potential offer for SoftBank Group Corp.’s 8.5% stake in T-Mobile US Inc., a deal that would give the German telecom giant greater control over its U.S. affiliate.
The terms of a potential deal, including whether Deutsche Telekom might bid for the entire stake to get majority control, haven’t been finalized and no firm decision has been made about an offer, according to people familiar with the matter, who asked not to be identified because the talks are private. Deutsche Telekom Chief Executive Officer Tim Hoettges may reveal plans to expand the company’s U.S. presence at a capital markets day this week, one of the people said.
Representatives for Deutsche Telekom and SoftBank declined to comment.
Hoettges has a unique opportunity to increase the carrier’s exposure to the U.S., which generates healthier returns than the rest of its footprint, for a below-market rate. In 2020, SoftBank raised $14.8 billion from selling T-Mobile US shares to institutional investors. The terms of the deal gave Deutsche Telekom the right to buy some of SoftBank’s remaining stake at a price based on T-Mobile US’s share price at the time, more than 20% cheaper than they are now.
Under the options’ terms, Deutsche Telekom can buy as many as 44.9 million shares at a price that’s roughly equivalent to where the shares were trading in June 2020, or just over $100, according to regulatory filings and statements from the companies at the time. Another 56.6 million shares are available at the 20-day volume-weighted average price leading up to the purchase. If Deutsche Telekom were to buy all 101.5 million shares at Wednesday’s prices, the deal would cost approximately $12 billion.
Deutsche Telekom has until June 2024 to act on the options.
The Japanese group became co-owner of T-Mobile US last year after the carrier completed a merger with Sprint Corp., which was controlled by SoftBank. SoftBank’s 8.5% holding in the merged company is valued at about $14.3 billion as of the shares’ last closing price. Deutsche Telekom currently owns 43% of T-Mobile US.
“We endorse the Board of Management’s objective of continuing on a consistent growth course in the United States and Europe,” said Ulrich Lehner, chairman of Deutsche Telekom’s supervisory board, in a separate statement ahead of the company’s capital markets day on Thursday. “The Supervisory Board also explicitly supports the expanded U.S. strategy - following the successful turnaround and the merger with Sprint.”
SoftBank has been raising capital over the past two years as part of a push to unload assets to finance stock buybacks and pay down debt. Masayoshi Son’s technology investment giant has enjoyed an upturn in fortunes over the past twelve months, with SoftBank’s Vision Fund investment arm driving recent profits after being the source of its biggest loss a year ago.
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