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October 23, 2001 — (WEB HOST INDUSTRY REVIEW) — Qwest Communications International Inc. (www.qwest.com), the broadband communications company, announced an agreement with Koninklijke KPN N.V., the Dutch telecommunications company, for Qwest to purchase from KPN
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approximately 14 million shares of KPNQwest N.V. for $4.58 per share and
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Anschutz Company, Qwest’s principal shareowner, to purchase an additional
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six million KPNQwest shares at the same price.
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Separately, KPNQwest announced plans for a major European expansion with the
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acquisition of Global TeleSystems, Inc.’s (GTS) Ebone and Central Europe
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businesses for approximately $580 million (645 million euro), including the
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assumption of debt. At the completion of the acquisition, KPNQwest will have
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a $450 million (500 million euro) credit facility to fully fund the combined
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company until it becomes free cash flow positive in the fourth quarter of
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2003.
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“Owning a larger stake in KPNQwest is a well-timed strategic opportunity as
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KPNQwest significantly expands its pan-European leadership position; fully
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funds its business plan after a major acquisition, and accelerates free cash
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flow,” said Qwest Chairman and CEO Joseph P. Nacchio, who also serves as
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chairman of the KPNQwest board.
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“The changes in the governance of KPNQwest eliminate a complicated structure
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that was useful when we set up the joint venture in late 1998,” Nacchio
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added. “We expect the new structure will free KPNQwest to respond faster to
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changing market conditions and accelerate its growth.”
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After Qwest purchases the KPN shares, the KPNQwest supervisory board will
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consist of six members. Qwest will nominate three directors, KPN will
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nominate one director and two directors will be independent of both Qwest
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and KPN. Qwest will retain its special rights to approve certain strategic
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decisions of KPNQwest.
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KPN’s equivalent special approval rights will be eliminated, but KPN will
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retain certain minority shareholder protection rights. The obligations of
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Qwest and KPN to not compete with KPNQwest in Europe will be terminated.
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However, if KPN engages in certain competitive activities, KPN’s minority
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shareholder protection rights will be eliminated, and KPN’s nominee on the
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KPNQwest supervisory board must be replaced by someone who is not affiliated
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with KPN.
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There are currently approximately 451 million shares of KPNQwest
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outstanding. As part of the purchase, the voting power of each Class A and B
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share will be reduced from 10 votes per share to one vote per share, which
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is the same as the voting power of each Class C share. After the purchase,
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Qwest will hold 214 million Class B shares, or about 47.5% of the voting
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power, and KPN will hold 180 million Class A shares, or about 40% of the
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voting power.
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Current restrictions on Qwest’s sale of its KPNQwest shares will be
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eliminated, except that Qwest will grant to KPN certain “tag-along” rights
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if Qwest were to sell any shares. Current restrictions on KPN’s sale of
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KPNQwest shares will be modified to permit KPN to sell these shares in
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underwritten public offerings, in private transactions to institutional
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purchasers who agree to be subject to the sale restrictions or, beginning in
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2003, in market transactions, subject to significant volume limitations. The
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buyer will receive publicly-held Class C shares. The “buy-sell” arrangements
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in the joint venture agreement among the parties will also be eliminated.
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Neither Qwest nor KPN will have any obligation to make capital contributions
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to KPNQwest. Qwest will continue to account for its proportionate share of
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KPNQwest’s profit or loss under the equity method of accounting.
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As part of the share purchase transaction, KPN will grant to Qwest an option
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to purchase some or all of KPN’s shares in KPNQwest in March 2002. Qwest is
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under no obligation to exercise the option, which is assignable to third
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parties. Until the option expires, any permitted sale of shares by KPN will
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be subject to a right of first refusal by Qwest.
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Qwest expects to close the purchase of KPN shares before December 31, 2001.
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The share purchase is subject to several conditions, including the execution
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of definitive transaction documents, consents of workers’ councils of KPN
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and KPNQwest, antitrust approval in the United States and Europe, and
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approval by KPNQwest shareholders of certain amendments to the KPNQwest
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articles of association.
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