KKR to sell ultrafast German internet business in €2.8bn deal
EQT and Canadian pension fund Omers to buy fibre network specialist Deutsche Glasfaser
KKR has agreed to sell its ultrafast German fibre internet business Deutsche Glasfaser to private equity firm EQT and Canadian pension fund Omers in a deal that values the company at about €2.8bn, according to people familiar with the matter.
EQT plans to merge Deutsche Glasfaser with Inexio, the German fibre optic network operator the Swedish group bought last year.
There is growing interest in high-speed internet businesses from private equity, with many firms tempted by the prospect of long-term returns from fibre networks as well as the high barriers to entry for rivals.
KKR put Deutsche Glasfaser up for sale last year and originally sought €3bn-€4bn, a person with direct knowledge of the process said at the time. The US buyout group valued the business at €200m when it bought a 70 per cent stake in 2015, another person familiar with the matter said.
Dutch investment company Reggeborgh, which founded the company in 2011, will also sell its 30 per cent stake to EQT and Omers as part of the deal.
The tie-up will create a significant presence in rural Germany’s high-speed internet market as the country’s government seeks to improve its patchy digital infrastructure.
“This is really on the agenda of the government for the next few years . . . we have an opportunity to contribute,” said Matthias Fackler, a partner at EQT, who added that Germany was “lagging far behind” other European countries in the rollout of high-speed fibre internet connections.
EQT will own 51 per cent of the combined group and Omers, which manages assets of C$97bn ($72.8bn) will own the rest. The two said they would invest more than €7bn in the rollout of high-speed internet infrastructure.
Once that investment had been made “we will benefit from very good visibility in terms of cash flow, and relatively high barriers to entry”, said Marco Pugliese, a managing director at Omers Infrastructure. The group would sell direct to consumers and other broadband providers.
Private equity groups are increasingly keen on fibre internet deals according to David Martin, a private equity infrastructure specialist at Linklaters.
“Such opportunities are underpinned as an infrastructure-type investment with more stable long-term cash flows,” he said. “We expect to see increased investment in fibre, the wider asset class and related technologies.”
Last year Omers bought Covage, a French fibre wholesale operator that aims to supply fibre connections to 8m households in France.