The Spanish telecommunications giant Telefónica is making progress in the planned full takeover of its German subsidiary Telefónica Deutschland. Investors have until January 17th to accept the offer from the Spanish company. However, during the period, Telefónica is significantly increasing its stake in the publicly traded mobile service provider.

Telefónica takes advantage of price drop In early November, Telefónica made an offer for 28% of the publicly traded subsidiary Telefónica. The Spanish Telefónica took advantage of the share price drop of its subsidiary to fully take back the publicly traded mobile service provider that had been independent since 2012.

Specifically, the European telecom giant is offering 2.35 euros per Telefónica Deutschland share, which is a 36.3% premium over the average price over the past three months before the takeover announcement. In total, Telefónica has to spend around 1.97 billion euros accordingly.

In the last business year, the German subsidiary generated a net profit of 248 million euros on an annual turnover of 8.22 billion euros. For comparison, the bidder Telefónica had a net profit of 2 billion euros on a turnover of 39.99 billion euros.

Background of the takeover The share price of Telefónica Deutschland had been heavily punished on the stock market in August when 1&1 signed a 5G roaming agreement with Vodafone. This not only clears the way for its own major network expansion difficulties, but also deprives the previous roaming partner Telefónica Deutschland of considerable future revenues.

With this step, the Spanish parent company is making a strategic turnaround. Until now, the declared goal was to reduce its own debt mountain through sales. Background: Telefónica is already highly indebted. Including pension obligations and other liabilities, the burden was lastly more than 42 billion euros. Now, the offer is intended to simplify the corporate structure. The takeover is intended to strengthen the position in the important core market of Germany. The other core markets include Spain, Brazil and Great Britain.

Possible lower dividend The offer is not tied to any minimum acceptance threshold. In addition, neither a profit transfer and control agreement nor a delisting is planned. However, Telefónica indicates that external shareholders may have to expect a lower dividend in the coming years if they do not accept the takeover offer.

Telefónica increases to 81% Although the offer period runs until January 17th, Telefónica has already increased its stake significantly. At the announcement of the takeover offer, the group only held 72% of the shares. Meanwhile, Telefónica reports a share of 81.5%. The phone giant would have to put 1.3 billion euros on the table for the remaining shares.

The share price, meanwhile, remains at 2.349 euros, almost exactly at the offer level.