Sunrise Gains After Germany's Freenet Takes Stake in Carrier

  • Freenet to buy 23.8 percent of Swiss wireless operator
  • Top executives from Freenet to join Sunrise board of directors

Sunrise Communications Group AG gained as much as 9.8 percent in Zurich after Germany’s Freenet AG agreed to buy a 23.8 percent stake in the Swiss phone carrier.

Sunrise, Switzerland’s second-largest mobile-phone operator, rose 5.8 percent to 68.85 francs at 12:51 p.m. local time after reaching 71.40 francs. Freenet said Thursday it agreed to buy 10.7 million Sunrise shares for 72.95 francs apiece, or a total of about 714 million euros ($805 million), from private-equity firm CVC Capital Partners.

Freenet, which trails Deutsche Telekom AG and Vodafone Group Plc in Germany, is gaining a foothold in a contested market. Sunrise competes with dominant phone company Swisscom AG in Switzerland, and also faces rivalry from Salt, the carrier formerly known as Orange Switzerland which billionaire Xavier Niel -- who sparked a cellular price war in France -- agreed to buy in 2014.

"We have been watching the development of Sunrise Communications AG very closely for some time now,” Freenet Chief Executive Officer Christoph Vilanek said in a statement. "We understand their business model and, with regard to cash orientation and the financial profile, we can see strong parallels with our profile on the capital market.”

There are no obvious synergies between Freenet and Sunrise, signaling Freenet may just be making a financial investment, Takis Spiliopoulos, an analyst at Vontobel, said in a note to clients. Freenet may also expect to benefit from potential consolidation in the Swiss phone market, he said.

Vilanek and Freenet Chief Financial Officer Joachim Preisig are set to join the board of Sunrise. Freenet said its management is supporting the proposals that Sunrise’s will submit at its annual general meeting on April 15.

Freenet shares fell 5 percent to 26.69 euros in Frankfurt. Sunrise sold shares last year in Switzerland’s largest initial public offering in eight years.

UBS Group AG acted as a financial adviser to Sunrise while CVC was assisted by Deutsche Bank AG.

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