MTTRY Ceconomy AG (PK)

By Carlo Martuscelli 
 

Shares of Ceconomy AG (CEC.XE) rose in trading on Monday morning following its announcement that Freenet AG (FNTN.XE) agreed to acquire around 277 million euros ($323.5 million) worth of newly issued shares in the company.

Ceconomy, a German consumer-electronic chain operator, said Friday that it would increase its share capital by around 10% and Freenet would purchase all the new shares. Ceconomy said it planned to use the proceeds to strengthen its balance sheet. The company posted a widened second-quarter loss on May 17 and its shares tumbled on June 19 amid reports that it was considering a capital increase.

Equinet Bank sees Freenet's stake purchase as a positive for Ceconomy, given the 18% premium that was paid for the shares.

"Freenet will join Haniel, Meridian Stiftung and Beisheim as 'anchor investor' in Ceconomy. Freenet is a long-standing partner and might go for an intensified partnership in mobile communication and TV business," said Equinet.

Shares of Ceconomy at 1031 GMT were up 9.2% at EUR7.80.

Goldman Sachs said that it expects a negative reaction from Freenet shareholders, as the deal could be seen as a defensive move to hedge its relationship with its biggest sales partner.

"Longer-term strategic benefits remain unclear, and whilst Ceconomy could offer Freenet a route to reselling or wholesaling fixed-line products, we believe this could be achieved via existing Freenet stores," it said.

Shares of Freenet at 1031 GMT were down 3.7% at EUR21.85.

Write to Carlo Martuscelli at carlo.martuscelli@dowjones.com

(END) Dow Jones Newswires

July 02, 2018 06:52 ET (10:52 GMT)

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