In compiling our list of the world’s most significant deals (“The 2000 Deals of the Year,” beginning on page 55), II’s editors, as always, try to track down transactions , whether successful or not , that best exemplify the year’s financing trends.
By David Schutt, Managing Editor
January 2001
Institutional Investor Magazine
In compiling our list of the world’s most significant deals (“The 2000 Deals of the Year,” beginning on page 55), II’s editors, as always, try to track down transactions , whether successful or not , that best exemplify the year’s financing trends. This year we didn,t have to look very far: Rarely in recent memory has so much transaction volume from all parts of the world been concentrated in a single sector, telecommunications, or has so much volatility visited a single business, the Internet.
As the Bank of England pointed out in December, European telecoms, share of the 2000 debt financing market was a staggering 46 percent, about twice the level of 1999, also a record. Investors, exposure, the bank fears, could start a global crisis if the companies, already heavily indebted, hit unexpected problems.
For a taste of last year’s telecom financing frenzy, look no further than Ron Sommer’s Deutsche Telekom. The telecom behemoth took its
T-Online Internet service provider public in April, raising E2.7 billion (about $2.4 billion) in the world’s second-largest Internet IPO to date. Two months later Deutsche Telekom raised E13 billion in a secondary share offering and a further E14.8 billion in a global bond sale, both records at the time. And then came its biggest transaction. The German phone giant bought the U.S.'s VoiceStream Wireless Corp. in July for $50.7 billion. At almost the same time, the company, through its T-Mobile subsidiary, was a winning bidder in the German government’s E50 billion sale of new wireless bandwidth. The winners paid about E8.5 billion for each license.
If Deutsche Telekom takes 2000’s prize for financing appetite, then Dutch Internet service provider World Online edges out a large field of competitors for the No. 1 volatility victim. On March 17 World Online launched into soft markets the biggest Internet IPO ever (a little larger than T-Online,s), raising E2.9 billion. Then, World Online chairwoman Nina Brink disclosed her infamous “transfer” of shares. Later it turned out she netted about $90 million in what was closer to a sale. World Online’s shares plunged from E43 to a bottom of E12 in September, when it was acquired. Roughly E2 billion in market capitalization vaporized.
Those who find all this troubling should look at Senior Editor Andrew Capon’s “Mass in Motion,” on page 83. The thesis? That today’s financial risk management techniques promote portfolio concentration, volatility and financial disruptions. The analysis might come in handy in 2001.
