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Blackstone Sells Stake at a Loss


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According to Reuters, The Blackstone Group LP (BX - Analyst Report) has reduced its stake in German telecommunications company – Deutsche Telekom AG – by nearly 33%. As per the source, Deutsche Telekom confirmed Blackstone’s stake cut last Friday.

Blackstone now holds nearly 2.93% stake in Deutsche Telekom compared with 4.44% in August this year. The proceeds from the sale of approximately 65.2 million shares totaled $713 million (€561 million) based on the closing price of €8.6 of Deutsche Telekom shares as of November 6, 2012.

In April 2006, Blackstone had bought nearly 192 million shares of Deutsche Telekom from the German state-owned bank, Kreditanstalt für Wiederaufbau – better known as the KfW banking group. KfW holds nearly 17% of the stake along with a 15% stake held by the German government.

Blackstone shelled out €14 per share or nearly €2.68 billion for the purchase. The company also agreed to a lock up period of two years to prove its commitment as a long-term investor. For this, it received one seat on Deutsche Telekom’s supervisory board and KfW agreed not to sell any further shares of Deutsche Telekom in the next one year. Majority of Blackstone’s total investment was financed with a margin loan provided by Deutsche Bank AG (DB - Analyst Report)

In our viewpoint, the possible reason for this stake sale is the Euro Zone crisis, which look far from over. Most of the companies are now trying hard to reduce foreign exposure and shed non-core assets to concentrate more on the domestic front as well as core fundamental activities. Blackstone’s decision to sell stakes reflects this very strategy.

In addition, Blackstone is on an acquisition spree with most of its acquisitions taking place on the domestic front, including the buyout of Vivint Inc and GCA Services Group. However, nothing can be said with accuracy about the intension of the stake sale as of now, since there is no official word from the company.

Blackstone currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.

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