Deutsche Telekom Weighs Selling Stake in Scout 24

Deutsche Telekom AG (DTE.XE) is considering selling a majority stake in its online advertising business Scout 24 as private equity suitors ask for more influence in the unit, according to people familiar with the matter Friday.

Germany's largest telecom operator is likely to exclude financial investors Apax Partners and potentially TPG Inc. from the auction due to disagreement over the degree of influence in Scout 24.

Such a move would leave private equity firms Silver Lake Management L.L.C, EQT and Hellman & Friedman L.L.C to run for the unit in a transaction that could be valued up to around 2 billion euros ($2.76 billion) in total.

While Deutsche Telekom originally planned to sell a 30% stake in Scout 24 and offered a vendor loan for the transaction--meaning it provides the debt financing for the buyer--it has now opened the door for external debt financing, people familiar with the matter say. Such a move is a hint that it is willing to sell more than half of the unit and potentially de-consolidate it.

Bankers say that any private equity buyer could finance buying a stake with debt of up to 7 times of its earnings before interest, taxes, depreciation and amortization of likely slightly above EUR100 million this year.

Private equity firms are scrambling to find potential targets as the deal flow has been rather subdued.

The private equity firms name declined to comment or couldn't be reached immediately.

A spokesman for Deutsche Telekom declined to comment.

Write to Eyk Henning at [e-mail]

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