Drillisch shareholders approve takeover by United Internet

By Georgina Prodhan

 

FRANKFURT (Reuters) - Drillisch shareholders voted overwhelmingly on Tuesday to approve a takeover by United Internet, creating a stronger competitor to Germany's three telecoms network operators in a deal worth over 8 billion euros ($9.33 billion).

 

The merger will give United Internet access to Drillisch's favorable mobile network terms and customer base, adding to the broadband infrastructure it has acquired and posing a more credible challenge to Deutsche Telekom, Vodafone and Telefonica Deutschland.

 

The Drillisch shareholders voted by 98 percent in favor of a new share issue that will buy it 100 percent ownership of United Internet's premium 1&1 retail brand and give United Internet 73.1 percent of Drillisch in return, in the last step of a staggered stock-and-cash deal.

 

The threshold for shareholder acceptance was 75 percent.

The combined Drillisch and 1&1 - which will keep the Drillisch name and remain listed - will have more than 12 million subscribers and 3 billion euros in annual sales.

Drillisch shares rose 2.2 percent to 57.20 euros by 1119 GMT, while United Internet shares rose 1.7 percent to 50.99 euros, outperforming the German Tecdax technology index, which rose 0.6 percent.

"I thank you sincerely for your trust," Drillisch Chief Executive Vlasios Choulidis told shareholders to applause at an extraordinary meeting in Frankfurt.

"In 1&1 we have an ideal partner with a extremely strong brand, a large customer base and enormous marketing capacity."

Budget mobile operator Drillisch had argued that its shareholders would benefit overproportionally from the merger, contributing just 28 percent of subscribers, 18 percent of sales and 26 percent of core profit but being valued at 34 percent of the new, combined Drillisch and 1&1.

The merger is expected to intensify competition in the German mobile market, where prices have held up well since its reduction to three network operators through the combination of Telefonica Deutschland and E-Plus in 2014.

As part of the regulatory terms of the deal, Drillisch gained access on favorable terms to Telefonica Deutschland's mobile network - a benefit that will now flow to United Internet, enabling it to use more of that network capacity.

United Internet, which also offers business-to-business and hosting services, acquired Germany's second-biggest fiber network after Deutsche Telekom's with the takeover of Versatel in 2014. It also owns 29 percent of Tele Columbus, Germany's third-largest cable operator.

Deutsche Telekom shares rose 0.4 percent, broadly in line with the German blue-chip DAX, Vodafone shares rose 0.5 percent in London and Telefonica Deutschland shares rose 0.3 percent.

Choulidis, who says he initiated the merger talks with United Internet CEO Ralph Dommermuth in March 2016, will become non-executive chairman of Drillisch once the deal is completed.

Dommermuth will become CEO of Drillisch, Drillisch finance chief Andre Driesen will remain CFO and current 1&1 CEO Martin Witt will become chief operating officer.

"We're delighted at the clear approval which the Drillisch shareholders have given to the capital increase," Dommermuth said in a statement.

(Reporting by Georgina Prodhan; Editing by Maria Sheahan and Susan Thomas)

 
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