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Business News/ Companies / News/  Slim’s America Movil to offer $9.6 billion for Dutch carrier KPN
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Slim’s America Movil to offer $9.6 billion for Dutch carrier KPN

America Movil says it will bid €2.40 a share in cash for the 70% in KPN that it doesn’t own

The sale requires approval from shareholders of KPN, which said on Friday it plans to convene a meeting in the coming weeks. Photo: Bloomberg (Bloomberg)Premium
The sale requires approval from shareholders of KPN, which said on Friday it plans to convene a meeting in the coming weeks. Photo: Bloomberg
(Bloomberg)

Madrid/New York: Carlos Slim’s America Movil SAB plans to buy the rest of Royal KPN NV for €7.2 billion ($9.6 billion), a move that may interfere with a bigger deal by the Dutch carrier to sell its German business to Telefonica SA.

America Movil will bid €2.40 a share in cash for the 70% in KPN that it doesn’t own, the Mexico City-based company said on Friday. That’s 20% more than Thursday’s close. KPN rose 16% to €2.31 at 2:09 pm in Amsterdam. The offer, to be made official next month, is subject to America Movil winning a stake of more than 50%.

The twist came weeks after KPN agreed to sell its largest business, E-Plus, to Spain’s Telefonica—Slim’s biggest rival in Latin America—to create Germany’s largest wireless carrier by customers. America Movil said on Friday it hasn’t decided if it will support the €8.1 billion transaction. The sale requires approval from shareholders of KPN, which said on Friday it plans to convene a meeting “in the coming weeks."

“This move, and the fact that Slim hasn’t made a decision over Telefonica’s bid for E-Plus, suggests that the billionaire will seek a sweetened offer from the Spanish company," said Andres Bolumburu, an analyst at Banco de Sabadell.

Under the 23 July agreement, KPN would get €5 billion in cash and a 17.6% in the entity created from the combination of E-Plus and Telefonica Deutschland Holding AG, the Spanish carrier’s unit operating under the O2 brand. The enlarged German operator would surpass Deutsche Telekom AG and Vodafone Group Plc by customer counts.

Losing Money

The deal values E-Plus at 9 times estimated full-year earnings before interest, taxes, depreciation and amortization, KPN said. The average multiple in phone-industry deals globally this year is 6.3, according to data compiled by Bloomberg.

“Telefonica’s offer for E-Plus is already high and I don’t see any other company being able to bid for the company," Bolumburu said.

The transaction requires antitrust approval because it would cut the number of network operators in Germany to three from four.

Slim, seeking to play a bigger role in Europe as the region’s telecommunications market consolidates, is pouring more money into an investment he has so far made losses on. America Movil spent about $4 billion increasing its stake in KPN last year, after bidding €8 a share. Shares in Telekom Austria AG have also slumped since America Movil acquired a stake last year.

A spokeswoman at Madrid-based Telefonica didn’t immediately have a comment. Stefan Simons, a spokesman at KPN, said the company took notice of America Movil’s statement and will study the proposed offer.

Telekom Austria

KPN’s gains on Friday erased the stock’s losses this year. America Movil rose 1.6% to 14.09 pesos in Mexico City on Thursday. The stock is down 5.4% this year, giving the company a market value of $80 billion. Telekom Austria jumped as much as 9.9% in Vienna on Friday. Telefonica fell as much as 1.2% to €10.80 in Madrid.

America Movil said it had informed KPN representatives of the offer and is seeking to meet with the board to discuss cooperation. It will make the official bid in September, once an offer memorandum has been approved by Dutch financial-markets authorities.

To buy KPN outright, America Movil would need to cancel a share buyback and obtain $4 billion of debt financing, Sanford C. Bernstein & Co. analysts said in a note last month.

KPN Foundation

America Movil may also need to deal with another hurdle. An independent foundation has the responsibility for defending KPN “from influences that may threaten the continuity, independence and identity" of the company, according to KPN’s filings. If the foundation’s board sees a threat, it may invoke an option to acquire from KPN Class B preference stock, which carries voting rights.

Peter Wakkie, a member of the foundation’s board, said in an e-mail that he didn’t want to comment on the latest developments.

Deutsche Bank AG advised America Movil last year on the KPN stake purchase. KPN at the time said it hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to evaluate options. Goldman Sachs and JPMorgan are also among KPN’s advisers in the E-Plus sale.

The Netherlands is emerging as one center of dealmaking activity as intensifying competition and slowing sales in Europe’s telecommunications industry is leading to consolidation. John Malone’s Liberty Global Plc said last month it raised its stake in cable-television operator Ziggo NV, a KPN rival, to 28.5%, which it said was for strategic reasons.

M&A Boom

Globally, telecommunications merger and acquisition transactions valued at about $63 billion have been announced this year, according to data compiled by Bloomberg. The average premium has been about 27%.

Slim’s company said the deal is aimed at intensifying the “synergy potential" with KPN. America Movil aims to support KPN’s plans in “a rapidly changing environment in Europe," the company said.

America Movil had 262 million subscribers at the end of the second quarter, with the company offering more discounts on smartphones and calling plans to keep competitors from switching to Grupo Iusacell SA in Mexico, Tim Participacoes SA in Brazil and Telefonica in both countries. Last month, the company reported a 2.1% drop in second-quarter profit, as sales rose 1.6%. Bloomberg

Martijn van der Starre and Fred Pals in Amsterdam, Adam Ewing in Stockholm and Aaron Kirchfeld in London contributed to this story.

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Published: 09 Aug 2013, 07:27 PM IST
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