Bloomberg News

Telefonica’s German Unit Has Buyers for All Shares in IPO

October 19, 2012

Telefonica Deutschland Holding AG, the German unit that Telefonica SA (TEF) plans to list in Frankfurt this month, has received orders for all the stock it plans to sell, according to deal terms obtained by Bloomberg News.

The order book is fully covered, including the so-called over-allotment option, according to terms e-mailed to potential buyers. Most orders are coming in the mid- to low-end of the price range, said two people familiar with the matter, who declined to be named because the details are private. A final price hasn’t been set, they said.

Strong demand for the stock is a relief for Madrid-based Telefonica, which is seeking to sell the shares as part of a bid to gain funds to reduce debt. Telefonica said this week it plans to sell almost a quarter of the German business in the IPO, raising as much as 1.68 billion euros ($2.2 billion).

“This shows how the deal is very attractive to investors even if the valuation was regarded as higher than its peers,” Andres Bolumburu, an analyst at Banco de Sabadell in Madrid, said by phone today. “It’s definitely good news for the company because it erases all doubts about a potential failure of the IPO.”

Telefonica, Spain’s biggest phone company, is offering as many as 258.8 million shares of Telefonica Deutschland at 5.25 euros to 6.50 euros each. The IPO values the German business at as much as 7.3 billion euros.

A Telefonica official in Madrid declined to comment.

Meeting Investors

Demand for the shares came at prices across the range offered, with funds from France, Switzerland and Spain among those seeking them, said a person with knowledge of the matter. The company’s management will meet more investors in Europe and the U.S. next week, the person said, asking not to be named as the details are confidential.

JPMorgan Chase & Co. and UBS AG are managing the IPO, with help from Bank of America Corp., BNP Paribas SA, Citigroup Inc. and HSBC Holdings Plc.

IPOs in Europe, the Middle East and Africa have raised about $8 billion this year, compared with $37 billion in the same period in 2011 as market volatility caused by Europe’s sovereign debt crisis slowed the pace of sales, according to data compiled by Bloomberg.

Telefonica shares fell 2.3 percent to close at 10.60 euros in Madrid, valuing the company at 48.2 billion euros.

Chief Executive Officer Cesar Alierta is selling assets, including Telefonica’s German and Latin American businesses, as he seeks to avert a further debt-rating cut. With more than 58 billion euros of net debt, Telefonica is Europe’s most indebted phone operator.

Moody’s Investors Service yesterday confirmed Telefonica’s long-term debt rating of Baa2, the second-lowest investment grade, with a negative outlook. Standard & Poor’s said last week it may reduce Telefonica’s BBB rating, equivalent to Moody’s, citing the company’s exposure to Spain’s sovereign risks.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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