German giant buys 20 pct of OTE

Deutsche Telekom, Europe’s biggest telephone company, yesterday agreed to buy 20 percent of Hellenic Telecommunications Organization (OTE) for -2.5 billion and aims to increase the stake in the Greek company. Deutsche Telekom will pay -26 a share to buy the stake from Marfin Investment Group, the Bonn-based company said in a statement. That’s 36 percent more than OTE’s closing price of -19.14 on March 14. The holding makes Deutsche Telekom the biggest shareholder in Hellenic Telecom after Greece, which has 28 percent. The deal values OTE at -12.7 billion. «Deutsche Telekom has been very vocal about adding higher-growth investments to their portfolio,» said Jankees Ruizeveld, who helps manage about $4 billion of telecommunication stocks at Robeco Group in Rotterdam. The German company said it plans to start talks with the Greek government and aims for an agreement «in the very near future.» «We don’t plan to buy all of OTE or to make an offer to all shareholders,» Deutsche Telekom Chief Executive Officer Rene Obermann said on a conference call. Sources in Athens said the government is willing to sell about an 8 percent stake in OTE to Deutsche Telekom and cede a significant share in the management, keeping 20 percent and the senior minority rights that go with it. «As soon as we receive the German telecom group’s bid for an increase in its share in OTE beyond 19.99 percent, the ministerial privatizations committee will confer to appoint the government’s advisers for negotiations to begin,» said the senior Finance Ministry source. He said the negotiations will determine the exact size of the stakes in OTE which Deutsche Telekom will want to buy from the government and the bourse so as to reach the 33 percent which it has set as a ceiling. They will also decide the number of positions on OTE board that will enable the German company to have a leading say in management. The arrangement is seen along the lines of the fruitless privatization tender issued six months ago which provided for the sharing of the positions of president and managing director between the government and the strategic investor. Most likely, the OTE president will be appointed by the government and the managing director by the Germans. The negotiations will also decide the number of members of the board which the two largest shareholders will have and the key positions which Deutsche Telekom’s managers will assume in the separate divisions of OTE. Market observers said the hefty premium which the Germans are paying also indicates they are «buying» a large section of the management. The deal «is a welcome development which is compatible with the government’s strategy on OTE,» Economy Minister Giorgos Alogoskoufis said in a release. The transaction is scheduled to be completed by May 7 at the latest, Marfin said in a statement. OME-OTE, the federation of unions at the Greek company, said they opposed a sale. Government attempts over the past decade to sell a stake in OTE to a European operator have similarly collapsed because of worker opposition and government reluctance to cede management control.

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