The Slovak government will decide on Deutsche Telekom AG’s offer to take over the rest of its Slovak unit it doesn’t own within a week, Finance Minister Peter Kazimir said.
Kazimir, speaking to reporters in Spacince, Slovakia, confirmed the talks with the German phone company, which has owned 51 percent of Slovak Telekom AS since July 2000. He declined to give a bid price for the 49 percent state stake. Three people familiar with the matter said the sides were negotiating an offer of about 900 million euros ($1 billion).
The cabinet of Prime Minister Robert Fico opened talks with Deutsche Telekom after it came in with a higher offer than the government would have raised in a planned initial public offering, the people said. The government wants to use the proceeds to reduce state debt, while Deutsche Telekom is seeking to jumpstart growth in Europe.
“There is a Deutsche Telekom bid on the table,” Kazimir said. “We are negotiating about it in detail and at the expert level. The price is significantly better” than the IPO price. “I expect that you will know everything within a week.”
Deutsche Telekom Chief Executive Officer Timotheus Hoettges said on a call with reporters Wednesday that he wouldn’t comment on how close the two sides are to completing the transaction. He said that Slovakia is at the “core” of the company’s strategy.
The shelved share sale, planned for Bratislava and London, would have fetched about 750 million euros if carried out, representing the biggest by a company from the European Union’s eastern members in almost four years.
The buyout accord would include locking 100 million euros in an escrow account until pending legal disputes are settled, the people said
“The price values the company above the average for the sector,” said Tomas Tomcany, an analyst at Patria Finance AS in Prague. “It reflects a premium for gaining full control. Nevertheless, it could support the valuation of telecommunication companies in the region.”
Deutsche Telekom traded at 16.54 euros at 1:20 p.m. in Frankfurt, down 0.4 percent from Tuesday, after dipping as much as 2 percent in opening trading.
Europe’s largest phone company, with businesses in eastern European countries such as Hungary, Poland and the Czech Republic, has about 2.2 million mobile-phone customers and almost 900,000 landline subscriptions in Slovakia, according to its 2014 report.
Slovak Telekom’s adjusted earnings before interest, tax, depreciation and amortization dropped 5.4 percent in the first quarter from a year ago to 73.3 million euros as revenue declined 1.7 percent to 187.4 million euros, the company reported in a statement on Wednesday.
The government, which in the past criticized its German partner for a reluctance to distribute the unit’s profits, may use the proceeds from the sale to cut the state debt.
Kazimir has cited Slovak Telekom’s dividend policy and ownership structure as the main reasons why the IPO was priced at the bottom of the indicative price range, set at between 17.7 euros and 23.6 euros per share.