I Agree With Myself
"Der amerikanische Finanzinvestor Blackstone plant nach einem Bericht der "WirtschaftsWoche" die komplette Übernahme der Deutschen Telekom." After an inquiry from an inscrutable reader I speculated wildly last month about Blackstone's motivations for taking a minority stake in Deutsche Telekom. My faithful reader wondered how the investment made sense given the traditional buyout model and pointed out that, at the time, the sink in stock price made it, at that point, a losing bet for Blackstone.
Several readers wrote in to comment, including a certain favorite editor of mine, a Deutsche Telekom employee and an anonymous Blackstone employee, which surprised even me. The take away for me was that at such a low multiple, with "single digit" interest rates and a modest dividend that could help defray the debt service, and you have a mostly-bootstrapped option on a larger stake in Deutsche Telekom, along with what amounts to "insider" diligence access. Plus you just bought something for under 6x EBITDA. Not bad for the Telekom [sic] sector.
Today's news makes it hard not to gloat a little bit.
At the time it looked to me like Blackstone was paving the way for a larger stake and since their investment model calls for control stakes I made little of the various protestations from Blackstone, including from Hamilton James, that we would "be seeing more of" these unconventional investments. Of course, Blackstone was going to give themselves a face-saving out in the event they either took a bath on or decided to exit early from Deutsche Telekom.
The most powerful argument against such a takeover, presented by my best and worst critic, is the size of Deutsche Telekom ($65.7 billion or so in market cap). That seems to be less an issue than it appeared to be, that is if you buy the reports that Blackstone is busily out raising EUR 60 billion to mount a takeover (and apparently the Frankfurt stock exchange, at least, does).
My favorite editor feeds me the following:
Quoth the Agence France Presse, citing German McBusiness paper WirtschaftsWoche:
FRANKFURT, June 23, 2006 (AFP) -
The US private equity firm Blackstone is preparing to launch an offer for
the entire share capital of Deutsche Telekom, Europe's leading
telecommunications group, the weekly WirtschaftsWoche reported on Friday.
Blackstone, which acquired a 4.5-percent stake in Deutsche Telekom and
therefore a seat on the group's supervisory board in April, was preparing to
raise 60 billion euros (76 billion dollars) from investors by the end of
this year in order to launch a full takeover offer next spring, the magazine
said, quoting sources familiar with the matter.
The German government holds a direct stake of 14.62 percent in Deutsche
Telekom, plus a further 16.63 percent indirectly via the public-sector
development bank KfW, which Berlin traditionally uses as its privatisation
vehicle.
Both the government and KfW said Friday that they had no knowledge of any
bid by Blackstone.
A Deutsche Telekom spokesman said that the government and KfW had both said they intended to remain the biggest shareholders for some time to come.
When Blackstone acquired its stake in April, it committed itself to holding
the stake for at least two years.
KfW is not allowed to sell its Deutsche Telekom shares before April 2007.
The speculation of a possible bid by Blackstone sent Deutsche Telekom shares
up to an intraday high of 12.70 euros on the Frankfurt stock exchange, a
rise of 0.20 euros or 1.6 percent on the day.
