Ad hoc notification of Deutsche Telekom AG
The Board of Management of Deutsche Telekom AG has decided to pursue a statutory merger of T-Online International AG into Deutsche Telekom AG under the German Transformation Act ("UmwG") which involves an exchange of T-Online International AG shares for Deutsche Telekom AG shares. Deutsche Telekom AG has been advised by KPMG that, based on a preliminary IDW-S1 discounted future earnings analysis performed by KPMG, the merger exchange ratio of T-Online International AG shares into Deutsche Telekom AG shares based on current expectations of future developments will be below the exchange ratio implied by current market prices from the perspective of T-Online International AG shareholders. Following shareholders approval as required by law, Deutsche Telekom AG believes the merger to complete in the second half of 2005.
Deutsche Telekom AG has also decided to initiate a voluntary cash tender offer to T-Online International AG shareholders at a cash price of EUR 8.99 per T-Online International AG share in order to provide liquidity and price certainty to all T-Online International AG shareholders who wish to sell their shares rather than wait for the completion of the merger. The voluntary tender offer will not be subject to any acceptance level conditions. Deutsche Telekom AG currently expects to be in a position to publish the offer document for the voluntary tender offer in November of this year, assuming routine regulatory clearances are obtained in a timely manner.
Deutsche Telekom AG also intends to repurchase own shares during 2005 to the extent required to eliminate any increase in the total number of shares outstanding as a result of the merger.
These decisions have been approved by Deutsche Telekom AG's Supervisory Board in a meeting today.
End of ad-hoc-announcement
Issuer's information/explanatory remarks concerning this ad-hoc-announcement:
The rationale for the merger with T-Online International AG ("T-Online") is essential for Deutsche Telekom AG's ("Deutsche Telekom") new strategy for the development of fixed and broadband markets in Germany. The introduction of the triple play strategy of combined voice, internet and TV services to the mass-market is critical to delivering the next phase of broadband growth in Germany. An integrated broadband strategy based on voice, internet and TV will also provide Deutsche Telekom with the capability to introduce bundled offerings which will drive higher revenues per customer, increase customer loyalty and significantly improve Deutsche Telekom's position in the voice market. The integration of T-Online into Deutsche Telekom provides Deutsche Telekom with the opportunity to establish optimal and continuous customer relationships, which is an essential prerequisite for the introduction of combined services offers. Therefore, it is a strategic aim of the Deutsche Telekom Group to implement the merger with T-Online as soon as possible.
Following completion of the transaction, T-Online will be a critical part of the new Broadband/Fixed-Line business unit of Deutsche Telekom with T-Online serving as the product brand for all IP-based services for the mass market. The T-Online business will remain a separate organizational unit within the new Broadband/Fixed Line strategic business unit ("SBU"), with T-Online's management and employees playing the key role in driving forward the Group's new broadband strategy. The new SBU will be governed by an executive committee chaired by Walter Raizner, and T-Com will be the brand for the entire SBU.
German merger law requires that an independent court appointed merger auditor ("Verschmelzungsprüfer") review the appropriateness of the merger exchange ratio from the perspective of both shareholder groups. As a matter of German merger practice, each company will appoint an accounting firm to act as appraiser to help ascertain the exchange ratio. The appraiser performs a discounted future earnings valuation ("Ertragswertgutachten") of both companies in accordance with the valuation guidelines known as IDW S1 published by the German Institute of Chartered Accountants ("Institut der Wirtschaftsprüfer e.V."). Both German law and practice and the valuation guidelines of IDW S1 set out clear procedures for the valuations which, in turn, are required for the determination of the exchange ratio. Accordingly, Deutsche Telekom has appointed KPMG as its appraiser and expects T-Online to appoint its own appraiser in due course. Each party will then have its own appraiser perform valuations in accordance with IDW S1, with the objective of establishing an exchange ratio to be reviewed by the court appointed merger auditor.
Deutsche Telekom does not expect the merger agreement including the exchange ratio to be available before January 2005.
This document contains forward-looking statements. Forward-looking statements are statements that are not historical facts and are identified by words such as "will," "expects," "anticipates," "plans," "intends," "believes" and similar expressions. Forward-looking statements are based on current plans, estimates and projections, and therefore you should not place too much reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws (such as our obligations to file annual reports on Form 20-F and reports on Form 6-K) and under other applicable laws. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. These factors include, among other factors, risks and uncertainties with respect to: our expectations regarding the merger share ratio, the timing and completion of the merger and earnings improvements, synergies and other benefits expected from the merger; the timing and scope of any purchases of Deutsche Telekom AG or T-Online International AG shares by Deutsche Telekom AG; and the risk factors detailed in our Annual Report on Form 20-F as filed with the United States Securities and Exchange Commission.
You are advised to read the prospectus regarding the business combination transaction referenced in these materials, when it becomes available, because it will contain important information. Deutsche Telekom AG expects that a prospectus will be filed with the Securities and Exchange Commission. You may obtain a free copy of the prospectus (when available) and other related documents filed by Deutsche Telekom AG at the Commission's website at www.sec.gov, at the SEC's public reference room located at 450 Fifth Street, NW, Washington D.C. 20549 or at one of the SEC's other public reference rooms in New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. When available, the prospectus and the other documents may also be obtained by contacting Deutsche Telekom AG, Attention: Investor Relations, 140 Friedrich-Ebert-Allee, 53113 Bonn, Germany and/or Deutsche Telekom, Inc., Attention: Investor Relations, 101 East 52nd East, 17th Floor, New York, New York 10022
