Advised freenet, an alternative telecoms company, on its acquisiton of debitel Group, the largest MSP provider in Germany
Apr 2008
acquired
$2,550 million
  • Sector: Communication Services
  • Deal Type: Strategic Deals; Public Deals
  • Engagement type: Buyside
  • Size: $2,550 million
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Arma Partners is pleased to announce that it acted as M&A advisor to freenet AG (Frankfurt:FRN) in freenet’s agreement, announced on 27 April 2008, to acquire debitel Group. The aggregate consideration payable will be ca. €1.63 billion. The vendor is a Netherlands holding company controlled by funds managed by Permira.

Freenet AG is a leading alternative telecoms company in the German market. debitel Group is the largest independent mobile service provider (MSP) in Germany, with over 13 million subscribers, and one of the leading overall mobile providers. debitel Group had pro forma 2007 revenues of ca. €3.36 billion and EBITDA of €255m. The combination of freenet’s mobilcom subsidiary, with over 5.5 million subscribers, with debitel will create the #3 overall mobile provider in Germany with 19m pro forma subscribers. freenet will also become the company in Germany with the most mobile gross customer additions (ca. 6 million in 2007), and the largest independent telecoms distribution company, with more than 1,000 owned distribution locations. The deal is a significant step in the long awaited consolidation of the German telecoms market and gives freenet a leading position from which to participate.

The total deal value of €1.63bn comprises, on a debt free, cash free basis, the issuance of 32m new freenet shares to the vendors (current market value approx. €360 million), the issuance by freenet of a €132.5m vendor loan note to the vendors and the assumption by Freenet of debitel‘s existing term banking facilities of €1,135m. Completion of the transaction is subject to customary approvals and is expected to take place within 2 to 3 months.

This is the second transaction on which Arma has worked with freenet, having advised also on freenet’s acquisition of Tiscali’s German broadband and narrowband subscriber base in early 2007.

– With c. 13.2 million customers, debitel Group is the leading MSP in Germany and the third largest overall mobile provider

– Together with its affiliated companies debitel Group has developed a Germany-wide distribution network with more than 6,000 points of sale as well as over 500 of its own shops

– debitel Group is controlled by Permira managed funds

– With c. 11.7 million customers, freenet AG is one of Germany’s leading telecommunications groups offering customers internet access (broadband & narrowband), fixed and mobile telephony, web hosting and portal services

– freenet’s mobilcom subsidiary is the #2 MSP in Germany with 5.7m subscribers and a broad offering of prepaid, postpaid and no frills mobile phone packages

– freenet AG employs c. 3,800 staff

– The transaction marks a significant step in the long awaited consolidation of the German telecoms market and gives freenet a leading market position from which to participate further

– The acquisition creates a German telecoms market leader with c. €5bn revenues, an adjusted EBITDA of c. €350m, and an extensive customer base of c. 19m subscribers

– The transaction positions freenet as the # 3 mobile player in the German market

– With c. 1,015 shops post transaction, freenet becomes one the largest network-independent distributors of telecoms products in Germany, able to sell multiple brands

– Substantial synergies are expected to be achieved from the integration of debitel and mobilcom, leading to significant EPS accretion

– Arma Partners has a longstanding relationship with freenet AG and has previously advised freenet on their acquisition of Tiscali’s broadband and narrowband customers in Germany

– Arma Partners acted as lead advisor in the M&A portion of this transaction, driving the negotiation process, due diligence and the positioning of the equity story

– Arma Partners helped to prepare the press release, the equity analyst presentation, and the investor Q&A, which were key considering the complex freenet shareholder structure

– Arma Partners was also appointed by the supervisory board of freenet AG to provide an independent fairness opinion on its acquisition of debitel Group