Telefonica Deutschland To Buy Royal KPN's German Unit E-Plus

(RTTNews) - Telefónica Deutschland Holding AG, part of Spanish telecommunication group Telefónica S.A. (TEF, TDE.L) Tuesday announced that it has agreed to acquire German mobile telecommunications business E-Plus from Dutch telecom firm Royal KPN NV (KPN, KKPNY.PK, KKPNF.PK).

As per the deal, KPN will receive 3.7 billion euros in cash and an initial stake of 24.9 percent in Telefónica Deutschland. Following the acquisition, E-Plus will become a wholly-owned subsidiary of Telefónica Deutschland. The transaction is expected to be closed in the middle of 2014.

Telefonica sees significant synergy potential from the deal and expects total value of synergies to be 5.0 billion euros to 5.5 billion euros net of integration costs. With this transaction, Telefónica Deutschland expects to become a leading telecommunications company in Germany, with combined revenues of 8.3 billion euros at the end of 2012.

René Schuster, CEO of Telefónica Deutschland said, "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."

The cash consideration payable to KPN will be financed entirely by a fully underwritten rights issue.

Telefónica S.A. will subscribe the issued shares proportionately to its current shareholding in Telefonica Deutschland. The new shares to be issued to KPN as further contribution will arise from a capital increase in kind providing KPN with a stake of 24.9 percent in Telefónica Deutschland after both capital increases.

Subsequently, Telefónica S.A. shall acquire shares amounting to 7.3 percent in Telefonica Deutschland from KPN. This will finally result in a shareholding of Telefónica S.A. in Telefonica Deutschland of 65.0 percent and KPN of 17.6 percent, and 17.4 percent will be free float.

No new debt will be raised at the level of Telefónica Deutschland.

According to the company, the combined entity will have 43 million customers to benefit from mobile and fixed high-speed Internet.

Separately, Telefonica Deutschland announced its second-quarter preliminary results. Net profit from continuing operations for the quarter was 3 million euros, down from 40 million euros in the prior year.

Revenues for the quarter were 1.216 billion euros, a decline of 6.2 percent over the same period of last year. Excluding mobile termination rate cuts, the decline was 3.8 percent.

In Madrid, Telefónica shares are currently trading at 10.3 euros, up 2.39 percent.

In Amsterdam, KPN shares trade at 1.86 euros, up 3.33 percent.