Private equity firm KKR has today launched a public takeover offer to the shareholders of German alternative operator Versatel, having previously agreed a separate deal with the company’s three largest shareholding groups. The deal is structured to give…
Private equity firm KKR has today launched a public takeover offer to the shareholders of German alternative operator Versatel, having previously agreed a separate deal with the company’s three largest shareholding groups. The deal is structured to give United Internet the flexibility to regain ownership of Versatel in the future, and to maintain some influence in the company in the meantime.
Public shareholders will be able to sell their shares for a minimum of E6.70 in cash, with the price based on the amount of the volume weighted average stock exchange price of the Versatel share during the last three months.
In a statement today, Versatel stated that its management board welcomed the deal.
Prior to today’s announcement, KKR had agreed another deal with Versatel’s main shareholders, which own a collective 92% of the company: German broadband business United Internet (which owns a 25.2% in Versatel), as well as private equity groups Apax (41.7%) and Cyrte Investments (25%).
Under that separate binding agreement, each of those groups will sell their shares at E5.50 apiece, 22% less than the deal being offered to public shareholders, to Victoria Fibre Holding, a vehicle controlled by KKR.
A spokesperson for KKR explained that the purpose of these two separate agreements was to allow United Internet to support the company going private now, to exert some continued influence once that takes place, and to keep its ownership options open for the future.
Addressing its part of the deal, United Internet said it would sell its own 11,492,000 shares in Versatel for a total of E63.2m – comprising E3.4m in cash and E59.8m as a deferred interest-free vendor loan 17 months from completion of the transaction.
After the 17 months, United Internet will have the option to purchase 25.1% of shares in Victoria Fibre Holding under the same conditions as KKR.
Between completion and the 17-month point, United Internet will also have a call option for 100% of shares in Victoria Fibre Holding, which can be exercised during specified exercise windows.
Once the transaction is complete, United Internet said it will serve on unspecified Versatel committees and cooperate closely with KKR on Versatel’s private customer business.
United Internet added that it currently expects to receive some E15m in income from the sale, and spend this on boosting its new customer acquisition activities.
Versatel CEO Alain Bandle said: “We welcome KKR’s interest in Versatel and are pleased that KKR is convinced of the strategy that the company is pursuing. As part of the strategic repositioning of the company, we have already increased efficiency within the organization and decisively focused the company’s activities on the identified growth sectors of Business and Wholesale, as well as on providing support to the company’s top quality customers in the Residential area. We look forward to the partnership with KKR and will continue this strategy in order to further develop Versatel’s position as an infrastructure-based market leader and preferred network partner focusing on the German wholesale and B2B telecommunications market as the cloud enabler.”
The company added that its board had already signed an investment agreement with KKR containing the key elements of the transaction and Versatel’s future foundation, including financing.
For the 2010 financial year, Versatel, which operates a fibre network, recorded a turnover of E725m, which it said makes it the country’s third largest alternative provider.
Apax bought its stake in 2005, while Cyrte increased its own stake in 2008.
Pending approval by the German Financial Supervisory Authority, BaFin, and the cartel office, the transaction is expected to close in H2.
Versatel was advised by BoA Merrill Lynch and Latham & Watkins, while KKR was advised by HSBC and Hengeler & Mueller. United Internet declined to name its own advisers. Apax and Cyrte were not reached before press time.
