Pitch Best Deal 2021: Apax & Warburg Pincus – T-Mobile Netherlands
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De beste deal van het jaar is meer dan het hoogste cijfertje in de krant en de kunst van het dealmaken is meer dan het opstellen van een contract. De Awards voor de beste deal zou dus niet alleen op de prijs van de deal gebaseerd moeten zijn, maar vooral op de – toegevoegde – waarde voor een bedrijf en de exit.
Name of the deal: Apax and Warburg Pincus acquire T-Mobile Netherlands
Date: 07-09-2021
Published value: 5.1 billion (€)
Buyer(s): WP/AP Telecom Holdings IV B.V., an entity jointly controlled by funds advised by Apax Partners LLP and Warburg Pincus LLC
Target: T-Mobile Netherlands
Seller: Deutsche Telekom and Tele2 of Sweden
Involved firms and advisors buy side:
Credit Suisse (M&A Advisory), Freshfields Bruckhaus Deringer (Legal Advisory Corporate/M&A), Stibbe (Legal Advisory Corporate/M&A), EY (Financial Due Diligence and Tax Advisory), Apax Partners (Private Equity Management), Warburg Pincus (Private Equity Management) Involved firms and advisors target:
Houthoff (Legal Advisory Corporate/M&A), KPMG (Financial Due Diligence)
Involved firms and advisors sell side:
Morgan Stanley (M&A Advisory), Clifford Chance Amsterdam (Legal Advisory Corporate/M&A), De Brauw Blackstone Westbroek (legal, legal banking & finance and tax), Meijburg & Co (Tax Advisory), KPMG (financial due diligence and PMI advisory)
Pitch
Brief description deal / Deal outline
WP/AP Telecom Holdings IV B.V., an entity jointly controlled by funds advised by Apax Partners LLP and Warburg Pincus LLC, has acquired T-Mobile Netherlands, the Dutch fixed and mobile communication services business, for an enterprise value of €5.1 billion. The sellers are Deutsche Telekom and Tele2 of Sweden. Closing of the transaction is subject to customary conditions, including regulatory approvals and consultation with employee representatives. Both Apax and Warburg Pincus have extensive experience in communications services and the broader telecommunications, media and technology (‘TMT’) sector and have invested in numerous companies in the sector globally.
Why should this deal win the Award for Best Deal 2021?
This transaction is significant in quite a number of ways:
- It is the largest ever transaction in the Dutch Telecom Sector.
- It is the largest ever transaction in the Benelux that has worked with a Warranty & Indemnity Insurance (W&I) Package. And the policy was arranged within a week.
- This is first signed transaction that has required a filing and approval from the Dutch Minister of Economic Affairs and Climate Policy (Minister van Economische Zaken en Klimaat) pursuant to article 14a.2 of the Dutch Telecommunications Act (Telecommunicatiewet) in respect of the acquisition of a controlling interest in a telecoms business by a foreign owner.
- The transaction also involves a complex set of carve-out arrangements, pursuant to which the target needs to be disentangled from its existing shareholder structures. This includes complex long-term brand licensing arrangements for the continuation of the company’s existing branding. Negotiating with multiple parties on both sides (Warburg Pincus and Apax as buyers and Deutsche Telecom and Tele2 as sellers) always adds layers and complexity to the negotiation process. Alignment is key for a smooth negotiation process and the lack thereof can cause severe delay and inefficiency. In this case, both on the sell-side (clients and advisors (Clifford Chance and De Brauw) and the buy-side (also due to the fact that WP and Apax have cooperated previously on other investments) this was extremely well managed and allowed negotiations to be concluded within a very short time frame.
Deal rationale:
T-Mobile has become the leading mobile network operator in the Netherlands and the first to offer unlimited and nationwide 5G, as well as becoming the fastest growing operator in fixed broadband market serving around 700,000 broadband customers at the end of Q2 2021. But the wireless revolution has only just begun. Over the next decade everyone will be able to remotely participate from anywhere in the world, enjoying an unprecedented virtual experience, and it will be possible for everything to be connected; becoming smarter, more efficient and safer. The new owners will support the company and its existing management team to lead this development and invest even more into people and their skills, next generation networks and digital services.
What is the impact of this deal on the company?
The transaction follows the successful turnaround of T-Mobile Netherlands by Deutsche Telekom and Tele2 and the transformation of the company into one of the fastest growing and leading European mobile network operators. Since 2017, T-Mobile Netherlands has significantly strengthened its mobile market share from 25 percent to 42 percent in 2020 (based on number of mobile SIMs), becoming the leading mobile operator in the Netherlands. T-Mobile Netherlands successfully entered the fixed market with the acquisition of Thuis in 2016 and further reinforced its market position by forming a strategic partnership with Open Dutch Fiber (owned by KKR and DTCP) in 2021. Today, T-Mobile Netherlands is a full FMC player and the fastest grower in the fixed market serving around 700,000 broadband customers as end of second quarter of 2021. Under the new ownership, T-Mobile Netherlands will become an independent Dutch Company and Apax and Warburg Pincus will support the next stages of the company's growth, as it continues to focus on innovation and growing its customer base.
What is the impact of this deal on the direct stakeholders?
The transaction provides an opportunity for our long-standing client Tele2 to realise value from the successful development in T-Mobile Netherlands and to conclude Tele2’s international consolidation. Under Tele2's strategic ownership in T-Mobile Netherlands, the company has become the leading mobile operator in the Netherlands, with a growing presence in fixed broadband, leveraging future-proof fibre to the home technology. Apax and Warburg Pincus will support T-Mobile to further accelerate growth and become a leading convergent player, by enhancing its network leadership, growing its fibre to the home customer base and delivering a best-in-class customer service, whilst investing even more into people and their skills.
What is the impact of this deal on society?
As one of the largest telecom providers in the Netherlands, T-Mobile plays an important role in society and strives to ensure equal access to the opportunities that digitisation offers. Its mission to connect everyone is not just a commercial one, but also a social one. T-mobile has committed to connect one million Dutch households to the glass fibre network in the next five years. Over thenext decade, it will be possible for everything to be connected in a smarter, more efficient and safer way. As a result of this transaction, T-Mobile will continue to grow as the leading telecom provider for consumers and businesses in the Netherland
What was most complex about this deal?
One of the most complex aspects of this deal was the fact that sellers needed to align on the terms of the sale, while a successful process needed to be managed at the same time. A quick execution process was crucial in obtaining the best deal value in a controlled auction process. The fact that the deal with the preferred bidder needed to be completed (with two sellers at one side of the table) before other potential bidders would leave the process left very little time for the final negotiations. Furthermore, the T-Mobile business also falls under several Dutch law and regulations requiring prior approval before the transaction can be completed. In negotiations, significant time was spent on agreeing the process and timetable to get all necessary approval (including works council approval, Dutch telecommunications act approval, AFM approval, merger approval, etc).
