After passing on Freenet, United Internet takes $296M stake in Apax-owned Versatel

Montabaur, Germany-based United Internet said it bought 20.5% of Versatel for €14.46 per share, a 30% discount to the stock's Wednesday close. The Versatel stake is now worth about €200 million ($296 million) while the Drillisch holding is valued at €32 million.

Several months ago United linked up with Drillisch in an effort to buy rival Freenet.de AG, a combination cellular and Internet services provider. Through a joint venture, the two companies own 10% of Freenet. In a full-scale takeover, United was expected to take Freenet's Web division while Drillisch would absorb Freenet's MobilCom cellular activities. Last week those talks were abandoned.

With its new stakes in Drillisch and Versatel, United now looks set to become its own combination cellular and Internet services provider. All three companies sell time on the networks of bigger cellular and telecommunications companies such as Vodafone Group plc, Telefónica O2 Europe plc and Deutsche Telekom AG.

While United has specialized in reselling Internet services over Telekom's network, Versatel has its own network, analysts said. Versatel, which was bought by Apax Partners in 2006, formed its own network by uniting smaller, regional telecommunications companies.

The United purchase sparked speculation -- and at least one report -- that Apax now may be looking for an exit from its Versatel investment. After an initial public offer earlier this year, it now owns 44% of the company.

Analysts think United Internet's purchase of Drillisch stock will give it greater influence over their jointly owned 10% stake in Freenet.

"By ending the talks with Freenet, United Internet showed that it wasn't willing to go too high. United Internet now has an even better strategic position, and that's not good news for Freenet," wrote WestLB AG analysts in a note. The analysts have a buy rating on United Internet's shares.

Versatel shares traded up 14.4%, or €2.97, in midafternoon Frankfurt trade at €23.56. United Internet was up 3%, or €0.46, at €15.84 while Drillisch was down 4.2%, or €0.26, at €6. Freenet was down 2%, or €0.32, at €15.68.