SoftBank Group Corp. is acquiring 4.5% of Deutsche Telekom AG in an equity share swap that will also see the German carrier increase its slice of T-Mobile US Inc.
Deutsche Telekom plans to exercise call options granted under a separate 2020 deal to acquire about 45 million T-Mobile shares, issuing 225 million new shares to SoftBank in exchange. The German company then expects to complete a previously announced sale of T-Mobile Netherlands for $2.4 billion, using the money to acquire another 20 million T-Mobile shares, the companies said in a statement.
SoftBank’s more than 300 portfolio companies gain access to an additional, approximately 240 million Deutsche Telekom customers across Europe and the US, providing these portfolio companies the ability to scale quickly and at a low cost. DT will benefit from ARPU increase, churn reduction and JV participation.
At the end of the transactions, SoftBank will end up with 4.5% of Deutsche Telekom and about a 3.3% slice of T-Mobile, which could rise to 6.9% contingent on the U.S. carrier hitting certain milestones. Shares in the Japanese investment giant rose as much as 8.7%, their most intraday since December.
The transaction diversifies SoftBank’s telecoms exposure across Japan, Europe and the US, with a 41 percent ownership of SoftBank Corp., 4.5 percent of DT and 3.3 percent of T Mobile US. SoftBank will have access to a total of nearly 300 million customers across the globe, including approximately 55 million from SoftBank Corp., approximately 95 million from Deutsche TeIekom and approximately 140 million from T Mobile US.
SoftBank will become the second largest private shareholder in Deutsche Telekom with intended board representation. Marcelo Claure, Chief Operating Officer of SoftBank Group Corp. and Chief Executive Officer of SoftBank Group International, will join the board of Deutsche Telekom.
In addition, SoftBank retains meaningful exposure to T Mobile US through shares underlying primarily floating options and, potentially, True-up Shares. SoftBank expects significant ongoing equity value creation at T Mobile US as it maintains 5G leadership and unlocks merger synergies.
SoftBank will be able to use Deutsche Telekom and T Mobile US stock as collateral for financing and hedging purposes.
Sullivan & Cromwell acted as legal advisors to SoftBank on this transaction.