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Germany sold a \u20ac2.5 billion ($2.7 billion) stake in Deutsche Telekom AG, the latest in a series of moves by the cash-strapped government to divest from some of its corporate holdings.<\/p>\n
State-owned bank KfW sold 110 million shares to institutional investors on Monday. While the placement trims the aggregate\u00a0holding<\/a>\u00a0of KfW and the government to a combined 27.8%, they remain Deutsche Telekom\u2019s largest shareholders.<\/p>\n The finance ministry said the net proceeds will be used to strengthen the equity of state rail operator Deutsche Bahn AG and to build out Germany\u2019s rail infrastructure. \u201cDue to the receptive stock market environment, the placement was successfully completed,\u201d the ministry said in an emailed statement.<\/p>\n In response to the sale, Deutsche Telekom said Tuesday it will increase its share buyback program by \u20ac600 million. The Bonn-based company initially\u00a0announced the program<\/a>\u00a0in November to repay investors, who\u2019d taken a hit when the company raised capital to increase its position in T-Mobile US Inc.<\/p>\n Deutsche Telekom shares fell about 2.1% in early trading on Tuesday.<\/p>\n The proceeds of the sale should help ease some of the pressure on Chancellor Olaf Scholz\u2019s ruling coalition, after a key funding tool was\u00a0struck down<\/a>\u00a0by the nation\u2019s top court last year.<\/p>\n Adding to the squeeze on spending, Finance Minister Christian Lindner has insisted on restoring a constitutional limit on net new borrowing that was suspended to help deal with the fallout from the Covid-19 pandemic and the energy crisis.<\/p>\n Lindner is aiming to complete negotiations with his cabinet colleagues on next year\u2019s finance plan by early July, before it\u2019s sent to parliament for approval by lawmakers. His challenge is to balance budget frugality with efforts to lift Europe\u2019s biggest economy out of a slump and modernize and expand the armed forces after years of neglect.<\/p>\n The government\u2019s latest share sale is part of what the finance ministry called its \u201cresponsible privatization policy.\u201d KfW earlier this year raised \u20ac2.2 billion selling a\u00a0stake<\/a>\u00a0in former mail monopoly Deutsche Post AG.<\/p>\n As part of fundraising for investment in Germany\u2019s rail system, Deutsche Bahn is currently gathering bids for its DB Schenker logistics unit, which could fetch more than \u20ac15 billion, people familiar with the matter said last month.<\/p>\n The books on the Deutsche Telekom stake sale are expected on Thursday, according to the terms. Morgan Stanley, JPMorgan Chase & Co. and Deutsche Bank AG carried out the placement.\u00a0<\/p>\n The divestment comes less than three weeks after the telecommunications operator, Europe\u2019s largest,\u00a0beat<\/a>\u00a0first-quarter earnings estimates thanks to growth in its two main markets, Germany and the US.<\/p>\n The company\u2019s shares have gained 4.1% this year. KfW already sold 22.4 million shares in the second quarter.<\/p>\n Meanwhile, Germany is\u00a0nearing<\/a>\u00a0a decision to strip Chinese critical components from the nation\u2019s 5G core network by 2026 \u2014 a move that will have a significant impact on Deutsche Telekom\u2019s business. The Bonn-based company has said that a ban of Chinese components by that time is not realistic.<\/p>\n<\/div>\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n