The German government on Monday selected Blackstone to take a strategic stake in Deutsche Telekom, one of the country’s national champions.
The US private equity group agreed to pay €2.68bn for 4.5 per cent of the share capital of the telecoms operator from KfW, the state-owned development bank. The price per share was €14, a 2.6 per cent premium to last Friday’s closing price of Deutsche Telekom.
The move is likely to reignite a debate in Germany that started last year after a senior German politician likened US hedge fund and private equity groups to a swarm of locusts, buying and stripping the country’s assets.
However, in selecting Blackstone, the German government has reinforced the country’s need to attract foreign capital as it continues to restructure many of its companies. The government owns 15 per cent of Deutsche Telekom.
Blackstone is expected to take a seat on the supervisory board of Deutsche Telekom.
“We are committed to being long-term investors in the company and our intention is to support the company and its management, particularly at supervisory board level - in executing a strategy of long-term value creation,” said Stephen A. Schwarzman, chief executive of Blackstone.
Ron Sommer, the former chief executive, is a member of Blackstone’s European advisory board. However, because of the sensitivity of the transaction, Mr Sommer is not thought to have taken an active role in the discussions.
The move is unusual for Blackstone, which typically makes equity investments where it has a controlling interest rather than building a minority holding.
Along with many of the world’s largest private equity groups, it has been bidding for several European telecoms and cable assets, including, most recently, TDC of Denmark. Blackstone is also thought to be part of a consortium looking at Portugal Telecom.
Apax, KKR, Providence Equity, Cinven, Apollo Management and Silver Lake Partners are among the rival private equity groups also thought to have bid for the Deutsche Telekom stake. The deal will give other private equity groups the confidence to undertake transactions in Germany.
“The German government is clearly working with private equity to attract foreign capital. That is a great message,” said one person close to the situation.
Blackstone is thought to believe that Deutsche Telekom is undervalued and may seek to increase its stake.