In a move which will be bad news for struggling Eircom shares, the German telecommunications company Deutsche Telekom announced that it is offering some 200 million shares in global markets from the end of the month. The offering, to raise about €11 billion (£8.7 billion), will be aimed at retail and institutional investors.
Despite the poor performance of telecoms shares on the market in recent weeks, Deutsche Telekom is coming back to the market with a third share offering as one of the companies to the forefront of consolidation in Europe.
The announcement of the availability of the blue chip shares will make it more difficult for KPN and Telia to sell their Eircom shares on international markets.
The shares on offer represent some 6.6 per cent of Deutsche Telekom's share capital. The offer will include an incentive programme of price discounts and bonuses to encourage retail investors to apply for shares.
To qualify for these incentives European retail investors will have to apply for shares in the early order period from May 31st to June 9th. European retail investors will have to buy a minimum of 25 shares while there will be no maximum order level.
In the Irish market, NCB Stockbrokers has been appointed the retail lead managers for the offer. Some 3,000 Irish shareholders bought Deutsche Telekom shares in the second offering in May 1999 at €37.50 per share. The shares, which hit €100 at the height of the telecoms frenzy, closed yesterday at €55. Irish shareholders who have held their shares will be entitled to a one-for-10 bonus in August this year.
Bookbuilding - where the sellers establish the level of retail and institutional interest in the shares at different price levels in advance of setting the price - will start throughout global markets on May 31st and continue until June 16th. There will be an early order period until June 9th and trading in the new shares will start on June 19th.
The incentives for retail investors are a price discount of up to 5 per cent on the trading price of the Deutsche Telekom shares on May 29th. The final price discount will be announced on May 30th. In addition, retail investors who buy shares in the offer and hold their shares until December 31st, 2001, will be eligible to receive one bonus share for every 10 held.
Kreditanstalt fur Wiederaufbau (KfW), the German state agency making the offering, is confident that the offer will be well received. "We are taking capital market capacity into consideration. The expected investor interest and the results of market research have been positive and we, therefore, believe that we can place this volume of shares without any problems," Mr Hans W. Reich of KfW said.
Deutsche Telekom was floated in 1996.
