Blackstone and Deutsche Telekom again

Blackstone Group could be back in the fray for Deutsche Telekom following the end of KfW’s lock-up period after the sale of a 4.5% stake in the business to the US private equity firm last April.

Speculation about Blackstone’s position on Deutsche Telekom is likely to intensify following Deutsche chief executive Rene Obermann’s comments that the business could become a target of takeover attempts if it could successfully carry out a plan to reduce costs.

Obermann’s comment, “I do not think it is impossible that we become the subject of takeover scenarios, if we cannot manage to increase the company’s valuation in the next few years”, suggests a long-term position, but it is notable that one of the group’s key shareholders has previously sold to private equity and has now finished its lock-up period.

KfW, the German development bank managing state assets, sold a 4.5% stake to Blackstone for €2.68bn last April, reducing its shareholding in Deutsche Telekom to 17.3%. In addition, the German state directly holds 15.2% of Deutsche Telekom shares.

Blackstone entered a two-year lock-up period on the sale of its stake, while KfW agreed not to sell any further shares, an agreement that ended this month.

The initial transaction confounded many in the private equity industry as buyout firms do not often pay premiums for what was an essentially illiquid asset. However, the US-based finance house has repeatedly asserted that it is happy to have a significant share of a highly undervalued business and is a “long-term” investor. Suggestions that the move had been motivated by a desire to limit the downside of an attempted full takeover bid have been roundly dismissed.

Despite several suggestions in past months that Blackstone would consider a €55.4bn approach for Deutsche Telekom, the firm has said that it has “no immediate plans” to increase its shareholding.

However, with a soon to be closed US$20bn (€14.8bn) fund needing to be deployed – as shown in its record-breaking takeovers of TXU and Equity Office in the US, the time appears to be ripe for Blackstone to take another look at Deutsche Telekom.