Yes, I agree with you that their tender offer signals they continue to see value in 1&1. The question is how long will it takes to unlock that value? probably 2-3 years.
I don’t think a squeeze out is good for the overall investment case for two reasons:
- If 1&1’s share price falls sharply over the next nine months—say, because of uncertainty around the network build-out—and a squeeze-out is launched within the following year, you may have little upside. Under German squeeze-out rules, the compensation is set at the higher of (i) the statutory fair value and (ii) the volume-weighted average price (VWAP) of the last three months before the announcement. Network buildout CapEx depress free cash flow in the short-term to medium term, so it’s likely that VWAP will be used. A depressed VWAP therefore caps your upside.
- Even if the share price were to remain stable at €18.50 until the squeeze-out, a premium of 20%-30% (guestimate) would only raise the offer price to a range of €22.20 to €24.05. This falls short of the 3x return you were targeting, and it might be better putting the capital in less risky opportunities?
There is a lot that can happen in the next 12 months that may make my squeeze-out offer estimate inaccurate. For instance, there is uncertainty regarding the low-band spectrum and the coverage obligations for 2025. If 1&1 doesn’t get the low-band spectrum in time (January 2026) and misses the 2025 coverage obligations, I believe investor confidence could erode, leading to further share price pressure. Given these risks, I estimate the potential squeeze-out offer to fall within a range of €18 to €24.05.