November 21, 2013 / 3:41 PM / in 4 years

UPDATE 1-D.Telekom sells classified ad business to private equity

3 Min Read

* Says deal values Scout24 at 2 billion euros

* Sees closure of the deal in Q1 next year

FRANKFURT, Nov 21 (Reuters) - Deutsche Telekom will sell 70 percent of its classified advertising business Scout24 to private equity firm Hellman & Friedman for about 1.5 billion euros ($2.02 billion).

The deal values Scout24 at 2 billion euros including debt, the German company said on Thursday. It expects to close the transaction in the first quarter of next year.

The sale comes almost a year after Deutsche Telekom said it would look at options for Scout24, a cluster of Internet portals which includes European car trading site AutoScout24 and real estate site ImmobilienScout24.

Deutsche Telekom is looking for cash to fund the expansion of a fourth-generation mobile network that can transport huge amounts of data to cater for the growing number of customers who use smartphones and tablet computers.

At the same time it is expanding a fibre-optic network to offer superfast internet to compete with its cable rivals.

The company said in December last year it expected to invest almost 30 billion euros between 2013 and 2015.

Deutsche Telekom has not disclosed any results for Scout24 in the past, but a source familiar with the matter said a price tag of about 2 billion euros would value Scout24 at 20 times the company's earnings before interest, tax, depreciation and amortisation (EBITDA) last year.

That looks like a high multiple even for private equity firms investing in technology and telecom assets, which they have often acquired at multiples of around 10 times.

However, such a valuation is not unheard of. Shares in peer Rightmove, a UK property portal, currently trade at 22 times its expected forward EBITDA, according to Reuters data.

The interest of buyout firms in the technology sector is high as buoyant debt markets have encouraged private equity to consider larger deals.

Michael Dell this year teamed up with private equity firm Silver Lake Partners LP to take Dell Inc private for $24.9 billion.

"There is so much cheap money out there that investors have become less prudent," said a Deutsche Telekom top-25 shareholder who declined to be named.

Deutsche Telekom shares were up 1 percent by 1500 GMT, outperforming a 0.3 percent gain by an index of European telecom companies.

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