Berlin opens doors to Blackstone

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Germany’s finance minister on Monday waved aside political concerns on foreign investors as Blackstone, the US buy-out group, became a strategic investor in Deutsche Telekom.

Blackstone yesterday secured a strategic 4.5 per cent stake in Deutsche Telekom for €2.68bn ($3.32bn), the first time the US group has bought a holding in a government-controlled company.

The deal, first reported in the FT, gives Blackstone a seat on the board of one of Germany’s biggest national champions. Last year, Franz Müntefering, Germany’s deputy chancellor, sparked controversy by describing foreign investors as “swarms of locusts”.

But Peer Steinbrück, German finance minister, on Monday dismissed suggestions Berlin had ignored past political criticism of investors’ short-termism.

He maintained Blackstone was focused on the long-term perspectives of the companies it invests in.

The deal was favourably received despite the fact that Ron Sommer, ousted as Deutsche Telekom’s chief three years ago, is a member of Blackstone’s international advisory board.

Deutsche Telekom’s shares rose nearly 4 per cent to a more than 3-month high of €14.20 a share after the deal received a favourable reception. Shares in other large European telecoms groups rose with them.

Blackstone refused to provide details on how it would finance the deal, understood to have required one of the buy-out group’s biggest ever equity investments. It has previously made equity investments in the $700m-$800m range.

The investment marks a departure from Blackstone’s typical way of working: taking controlling equity stakes in businesses it believes under-valued.

But Blackstone claimed it was a value investor and the investment did not mark a strategic shift.

“Our intention is to support the company and its management, particularly at the supervisory board level,” Stephen Schwarzman, co-founder of Blackstone, said. Larry Guffey, a London-based Blackstone partner, is expected to join Deutsche Telekom’s supervisory board.

The US buy-out group will pay €14 for each Deutsche Telekom share, a 2.6 per cent premium to Friday’s €13.65 closing share price.

The deal will reduce the stake held in Deutsche Telekom by KfW, the German state bank, to 17.3 per cent. The German government still holds 15.2 per cent, with a 63 per cent free float.

KfW has agreed with Blackstone a one-year lock-up on any future share sales by KfW, while Blackstone has agreed a two-year lock-up regarding the sale of its shares.

Deutsche Bank advised Blackstone on the transaction.

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