Apax, Warburg team up for EUR 5.1bn T-Mobile Netherlands deal

The deal values the business at 8.7x its last-12-month adjusted EBITDA, according to a statement by Deutsche Telekom.

The transaction is subject to customary closing conditions, including regulatory approvals and consultation with employee representatives. Upon closing of the transaction, Deutsche Telekom will receive approximately EUR 3.8bn in net cash proceeds.

Apax and Warburg will hold equal equity stakes in the newco. The former is investing via its Apax X fund, which closed on USD 11bn earlier this year. Warburg will do the deal through Warburg Pincus Global Growth Fund, which held a final close on USD 14.8bn against a target of USD 13bn in late 2019.

The sale was being run by Morgan Stanley. Three or four parties remained in the process as of late August, including an unnamed strategic bidder, according to a report by Unquote sister publication Mergermarket. Indian conglomerate Reliance Industries was reported to be mulling a bid for the asset earlier in August.

Warburg showed strong interest in the business at an early stage and was thought to be well positioned due to its existing relationship with Deutsche Telekom, according to the aforementioned Mergermarket report.

Apollo was also thought to be very interested in the business, having contemplated acquiring the asset in the past. Blackstone, Providence and BC Partners, which were previously reported as potential bidders, were no longer involved in the process as of late August. Cinven and NJJ Capital – a private holding company run by French billionaire Xavier Neil – were also among those mulling a bid for the unit.

Several bidders that showed initial interest dropped out due to the competitiveness of the process and the sell-side's valuation expectations, according to Mergermarket. Deutsche Telekom CEO Tim Hoettges was quoted by local press in August as saying that there was intensive bidding competition for the business.

Apax and Warburg Pincus have teamed up before, jointly investing in Inmarsat, a mobility-focused satellite operator focused on the maritime, aviation and government markets in 2019.

Other telecoms investments for Apax include Salt, Wind Telecom and TDC, while Warburg has backed Ziggo, Inexio and Community Fibre.

The deal marks the completion of Deutsche Telekom's strategic review of T-Mobile Netherlands, which was announced in May 2021, and follows the EUR 700m divesture of its Dutch mobile tower business earlier this year.

Company
T-Mobile Netherlands is a Netherlands-focused telecoms operator with four brands: T-Mobile, Tele2, Ben and Simpel. The company claims to be the first to offer unlimited and nationwide 5G, along with its fixed broadband offering.

According to Deutsche Telekom, T-Mobile posted a 15% compound annual growth rate in adjusted EBITDA between 2018 and 2020. Furthermore, the business has grown through M&A, acquiring Thuis in 2016, combining with Tele2 Netherlands in 2018 and acquiring Simpel in 2020.

The company generated EUR 2bn in revenues for a EUR 582m adjusted EBITDA in the 12 months to 30 June 2021.

People
Apax Partners – Gabriele Cipparrone (partner).
Warburg Pincus – René Obermann (co-head of Europe, managing director of Warburg Pincus Deutschland).

Advisers
Equity – Credit Suisse (M&A); Liontree (M&A); Freshfields Bruckhaus Deringer (legal); Simpson Thacher & Bartlett (legal).
Vendors – Morgan Stanley (M&A); De Brauw Blackstone Westbroek (legal).

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