The German state development bank KfW and the German government agreed Monday to sell a 4.5 percent stake in Deutsche Telekom to US private equity firm Blackstone for 2.68 billion euros ($3.3 billion).
Germany's telecommunications giant will get an injection of US investment
The sale of the stake to Blackstone is seen by financial experts as a sign that Germany is facing up to the fact that it needs to attract foreign capital as it looks to restructure many of its top companies.
The deal, at a purchase price of 14.0 euros per share, flies in the face of a statement made by Social Democrat Franz Müntefering last year in which the labor minister described some foreign investors as "locusts" who devoured German companies and destroyed jobs.
KfW and the German government, which holds a 15.2 percent stake in Telekom, said that the deal is part of KfW's strategy of broadening the investor base in its privatization of Deutsche Telekom.
The bank also said that it had agreed as part of the deal not to make further sales of its remaining 17.3 percent stake in Deutsche Telekom for a period of one year.
Support role at Telekom for US investor
DT boss Kai-Uwe Ricke will welcome Blackstone to the board
The move is unusual for Blackstone which prefers to take controlling stakes in companies rather than a minority share although reports suggest that the US firm is expected to take a seat on Telekom's supervisory board.
"We are committed to being long-term investors in the company and our intention is to support the company and its management -- particularly at the supervisory board level -- in executing a strategy of long-term value creation," said Blackstone Chief Executive Stephen Schwarzman in a statement.
Blackstone managed some 14 billion dollars of investments across the world last year, mainly in property and corporate debt. It also advises firms on restructuring programs.
Deutsche Telekom, Europe's largest telecommunications company, is planning to invest in new technology and cut thousands of jobs to counter a fall in its traditional fixed-line business as part of its restructuring strategy.
Foreign investment a positive step say experts
Despite fears that German jobs could be at risk from the involvement of outside investors, observers feel that the move by the German government to favor Blackstone is a positive one.
"The German government is clearly working with private equity to attract foreign capital. That is a great message," the Financial Times Deutschland quoted one unidentified person close to the deal as saying.