Japan’s SoftBank Group Corp. has entered into an equity share swap agreement with Germany’s Deutsche Telekom AG.
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.
Deutsche Telekom will exercise a portion of its call options that were granted by SoftBank in connection with their June 2020 agreement.
DT will acquire approximately 45 million T-Mobile US shares from SoftBank in exchange for issuing 225 million new Deutsche Telekom shares to SoftBank from its authorized capital. In a subsequent step, Deutsche Telekom envisages exercising call options to acquire another approximately 20 million T Mobile US shares from SoftBank by re-investing $2.4 billion of expected disposal proceeds from the announced sale of T-Mobile Netherlands.
As a result of these transactions – the equity share swap and the re-investment of proceeds – SoftBank will become a 4.5 percent shareholder in Deutsche Telekom and retain a 3.3 percent stake in T Mobile US, which could increase to 6.9 percent through True-Up Shares, if T Mobile US stock price were to hit certain milestones.
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 Telekom 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.