United Internet’s subsidiary 1&1 Internet and freenet have signed an agreement for the acquisition of freenet’s DSL business and a preferred distribution partnership in respect of DSL products. The agreed purchase price for the acquisition is approximately EUR123m.
1&1 will acquire the entire issued share capital of freenet Breitband. Under the agreements, 1&1 will acquire all freenet’s freenetDSL and freenetKomplett contracts. At the point of technical migration of contracts, it is estimated that approximately 700,000 DSL contracts will be transferred to 1&1.
1&1 will pay approximately EUR70m in cash and 4,583,500 in United Internet shares, which will be paid from treasury shares. If the trading price of United Internet share is below EUR12 at the time of the technical migration of freenet’s broadband contracts, a compensating per share cash amount, calculated at EUR4 per United Internet share, will be paid.
The final amount to be paid depends on the number of DSL contracts ultimately migrated. It is intended that the technical migration be completed before year end 2009.
Under the distribution agreement, 1&1 has agreed, in addition to payment of market-normal DSL commissions, to pay a premium in the period until end of 2014 of up to 6,551,000 United Internet shares. The premium will be payable in four tranches, depending on achievement of defined annual distribution targets.
1&1 and freenet will also enter into a long-term partnership for the preferred distribution of broadband-based internet access products. The relevant distribution channels are approximately 1,000 mobilcom-debitel shops and the Internet portal freenet.de.
