Permira to buy Debitel stake for €640m

Permira, the London-based private equity firm, has agreed to pay €640m for Swisscom’s 95 percent stake in Debitel, the German telecommunications company.

Debitel, the German telecom business, is being sold to funds advised by Permira in a €640 million ($765 million) deal expected to complete in June 2004 subject to the approval of antitrust and monopolies commissions.

The financing for the deal includes a €210 million vendor loan note provided by Swisscom. The vendor will also offer Debitel’s remaining shareholders a voluntary public bid at a price of €11 per share in cash.

Swisscom said it was realising its investment in Debitel after hoped for savings had failed to materialise “due to differences in the business models of Swisscom and Debitel and the performance of European mobile communications markets”. Swisscom bought Debitel for around $2.5 billion in 2000, but much of the original value has since been written off amid the general downturn in the telecom sector.

Based in Stuttgart, Debitel provides mobile, fixed-line and internet telephony. It is the third-largest mobile provider in Germany after T-Mobile and Vodafone, and has around 10.3 million customers. In 2003, it posted revenues of approximately €3 billion. The firm has subsidiaries in Denmark, France, the Netherlands and Slovenia, and employs more than 3,100 people.

“We believe that the Permira Funds’ majority shareholding will further strengthen Debitel’s performance and reputation, benefiting both customers and staff,” said Peter Wagner, chairman of the board of management at Debitel.

“The group [Debitel] benefits from a substantial customer base, a strong strategic direction and the prospect of growth driven by the market position of Debitel,” added Uwe Kolb, a partner at Permira in Germany. “We are delighted that the Permira Funds are investing in such a healthy and promising business.”

In 2001, Kolb was involved in the €3 billion buyout of Cognis, the chemicals business, from Henkel. Last year, Permira’s German office sold dental equipment firm Sirona to EQT for €417.5 million and leather chemicals firm TFL Holding to Odewald & Compagnie, as well as buying a stake in spectacles manufacturer Rodenstock.

In October 2003, Permira closed Permira Europe III, Europe’s largest-ever private equity fund, on €5.1 billion. The firm has total committed capital of €11 billion and has completed over 260 private equity transactions since 1985.

Earlier this month, Permira submitted a £940 million offer for UK high street retailer WH Smith.