June 29, 2018 / 5:12 PM / 10 months ago

Freenet buys stake in Germany's Ceconomy via capital increase

FRANKFURT (Reuters) - German independent telecoms company Freenet (FNTGn.DE) will acquire 9 percent of Ceconomy (CECG.DE) via a rights issue, helping the consumer electronics retailer to strengthen its balance sheet after a recent Russian deal.

Freenet will buy 32.6 million new shares via a capital increase at a price of 8.50 euros per share, representing a consideration of 277.4 million euros ($323.9 million), Ceconomy said on Friday.

Ceconomy last week agreed to swap its Russian business and pay cash for a 15 percent stake in M.video (MVID.MM), a unit of Russia’s Safmar, allowing it to unload its loss-making Russian operation and take a share in the market leader.

In that deal, Ceconomy agreed to pay 258 million euros in cash at current exchange rates, though the figure could decline by as much as 86 million euros if M.video falls short of agreed profit targets this year and next.

Ceconomy had previously planned to go to market with a capital increase to finance the transaction but that was pulled when news of the equity fundraising sent its shares down sharply.

Freenet stepped up for the share offering, paying an 18 percent premium to Ceconomy’s closing price on Thursday.

“The Freenet investment is a clear vote of confidence in Ceconomy’s strategy and the future growth potential of our company,” Ceconomy CEO Pieter Haas said in Friday’s statement.

Freenet, for its part, said the deal would anchor a relationship dating back more than 25 years, through which its mobilcom-debitel subsidiary has marketed mobile communication offerings in Ceconomy’s MediaMarktSaturn stores.

“We aim to unlock considerable impetus going forward for our mobile communications business and also for the TV and Digital Lifestyle business,” said Freenet CEO Christoph Vilanek.

Ceconomy’s Frankfurt-listed shares closed 1.2 percent down at 7.14 euros, while freenet was up 0.2 percent at 22.69 euros.

Reporting by Douglas Busvine; Editing by David Goodman

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