By Jonathan Gould
FRANKFURT (Reuters) - German Internet service provider United Internet AG is investing 435 million euros ($582 million) for a 10.7 percent stake in venture capital group Rocket Internet, the companies said on Friday.
Berlin-based Rocket Internet aims to create the largest Internet empire outside the United States and China, and it is expected to list its shares in Frankfurt later this year, according to financial sources.
United Internet said its investment would strengthen a long-term relationship with Rocket's chief executive and co-founder, Oliver Samwer.
Rocket said the transaction, which involves a cash contribution from United Internet and equity contributions from both United and Samwer, values Rocket at 4.3 billion euros.
United Internet has also been working with Samwer and his brothers through a venture capital fund called Global Founders Capital since 2007.
The fund's portfolio includes over 50 venture capital investments such as minority stakes in videogames makers, online travel sites and financial technology companies.
United Internet is contributing its 102 million euro equity participation in Global Founders Capital to Rocket, while the Samwer brothers are contributing their portfolio interest worth 153 million euros, in exchange for shares in Rocket.
"My brothers and I are combining all our new company building and investing activities within Rocket," Oliver Samwer said in a statement.
United Internet said it would recognize one-off, non-cash income of around 70 million euros this year from contributing its share in the investment funds to Rocket.
United Internet has been investing in consumer Internet and technology businesses. Its chief executive, Ralph Dommermuth, told Reuters this week it was also mulling a complete takeover of cable group Versatel.
Dommermuth will become a member of Rocket's nine-person supervisory board as part of the deal.
BUILDING A BASE
Interest in Rocket Internet, whose companies employ 20,000 staff in over 100 countries, has heated up in anticipation of a public flotation.
Earlier this month, Philippine Long Distance Telephone Company (PLDT) said it was buying a 10 percent stake in Rocket Internet for 333 million euros.
Sources close to the matter told Reuters two months ago that Rocket would aim to raise new capital to help it grow rather than see current owners cash out if it decided to proceed with a listing.
Friday's deal makes United Internet Rocket Internet's fifth shareholder.Following the deal, Swedish investment firm Kinnevik will hold an 18.5 percent stake in Rocket, Access Industries 8.5 percent, PLDT 8.6 percent and the Samwer brothers' investment vehicle, Global Founders Fund, 53.7 percent.
Kinnevik Chief Executive Lorenzo Grabau said in a statement, "The United Internet transaction not only brings to Rocket Internet additional capital to support its long-term growth ambitions but also a portfolio of attractive investments in complementary online verticals and geographies."
(Reporting by Jonathan Gould; editing by Jane Baird)