Under the equity share swap agreement, DT 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 (“TMUS”) shares from SoftBank in exchange for issuing 225 million new DT shares to SoftBank from its authorized capital. In a subsequent step, DT envisages exercising call options to acquire another approximately 20 million TMUS 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% shareholder in DT and retain a 3.3%1 equity stake in TMUS, which could increase to 6.9% through True-Up Shares, if TMUS stock price were to hit certain milestones.
The transaction diversifies SoftBank’s telecoms exposure across Japan, Europe and the US, with a 41% ownership of SoftBank Corp., 4.5% of DT and 3.3%1 of TMUS. 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 DT and approximately 140 million from TMUS.
The transaction is financially compelling. SoftBank is exchanging TMUS shares underlying primarily fixed price options with no upside, for stock in DT, which SoftBank believes has significant long-term upside beyond the agreed reference price of €20. SoftBank will become the second largest private shareholder with intended board representation. In addition, SoftBank retains meaningful exposure to TMUS through shares underlying primarily floating options and, potentially, True-up Shares2. SoftBank expects significant ongoing equity value creation at TMUS as it maintains 5G leadership and unlocks merger synergies.
SoftBank will be able to use DT and TMUS stock as collateral for financing and hedging purposes. Any such transaction would be consistent with the long-term strategic partnership, with SoftBank retaining significant exposure to DT and TMUS share price.
“This is a landmark transaction that is a true win-win-win for our portfolio companies, SoftBank and Deutsche Telekom,” said Marcelo Claure, Corporate Officer, Executive Vice President & Chief Operating Officer of SoftBank Group Corp. and Chief Executive Officer of SoftBank Group International. “The long-term strategic partnership will create incredible opportunities for our portfolio companies to turbocharge their growth with access to approximately 300 million customers across Japan, Europe and the US in total. The transaction diversifies our telecoms exposure and results in SoftBank becoming DT’s second largest private shareholder, while retaining meaningful exposure to high-growth TMUS. It also marks a decisive step for DT towards their stated objective of acquiring a majority stake in TMUS, and the addition of the world’s largest technology investor in SoftBank validates their Telco 2030 vision and demonstrates the “Magenta Advantage.” I look forward to partnering with Tim and team long into the future.”
“We are delighted to welcome SoftBank as a new key investor and strategic partner for Deutsche Telekom and can’t wait to get to work on the value creation opportunities from this cooperation for both SoftBank and Deutsche Telekom,” said Timotheus Höttges, Chief Executive Officer, Deutsche Telekom AG.
In connection with the agreement, DT’s management will support a proposal by SoftBank to have Mr. Claure elected to the Supervisory Board of DT at the next annual general meeting. The transaction has been approved by the Board of Directors of SoftBank and the Supervisory Board of DT and is expected to close and become effective by incorporation in DT’s commercial register.
Sullivan & Cromwell acted as legal advisors to SoftBank on this transaction.
About SoftBank Group
The SoftBank Group invests in breakthrough technology to improve the quality of life for people around the world. The SoftBank Group is comprised of SoftBank Group Corp. (TOKYO: 9984), an investment holding company that includes stakes in telecommunications, internet services, AI, smart robotics, IoT and clean energy technology providers; the SoftBank Vision Funds, which are investing more than US$100 billion to help extraordinary entrepreneurs transform industries and shape new ones; the $US5 billion SoftBank Latin America Fund, the largest venture fund in that region, and the SB Opportunity Fund, a US$100 million fund dedicated to investing in enterprises founded by entrepreneurs of color in the U.S. To learn more, please visit https://global.softbank.
1 Includes anticipated impact of intended exercise of ~20M TMUS options by DT using $2.4 billion in proceeds from sale of T-Mobile Netherlands. Prior to the intended exercise of options, SoftBank ownership is 4.9%
2 True-up Shares become available if TMUS stock price hits certain milestones