Carlos Slim in $9.6BN bid for Dutch telecom KPN

August 9, 2013 by Toby Sterling

America Movil SAB, owned by Mexican billionaire Carlos Slim, will launch a 7.2 billion euro ($9.6 billion) bid for the part of Dutch telecom company Royal KPN NV it doesn't already own, in a challenge to a rival offer for KPN's prized German mobile group E-Plus.

Movil's 2.40 euros per share bid for KPN announced Friday offers a 20 percent premium on Thursday's closing price, valuing the company's stock at around 10.3 billion euros, and the 70 percent it doesn't already own at 7.2 billion euros.

The news of the approach sent KPN shares 17 percent higher to 2.34 euros in Amsterdam.

The offer price is miles above the 1.60 euros KPN's shares were trading at in mid-July before Movil's arch-rival, Telefonica SA, announced plans to buy E-Plus from KPN for around 8.1 billion euros.

The Telefonica deal was backed by KPN's management, but many analysts believe Slim, the world's richest man according to Forbes magazine, wants E-Plus for himself. E-Plus has a 15 percent stake in the German market that would be near-impossible to build from scratch.

Also, "Slim could be forcing Telefonica to step up and bid for all of KPN, in which case he could exit at a higher price," said analyst Guy Peddy in a note written by a team of analysts from Macquarie Capital.

"At the very least, Telefonica will likely have to significantly raise its bid on E-Plus, which would cause its leverage to balloon" and hurt its ability to invest in Latin America, where it competes directly with America Movil, said Peddy.

Movil said it initially invested in KPN to improve its geographical diversity. Now it wants a controlling stake "to facilitate greater operational cooperation and co-ordination between the two companies."

KPN spokesman Ward Snijders said Friday the company is "studying" the America Movil bid.

The Telefonica deal for E-Plus must still be approved by KPN shareholders—including Movil— and it is expected to receive scrutiny from European regulators as it would combine Germany's third and fourth largest mobile providers.

Analyst Marc Hesselink of ABN Amro said there appear to be few hurdles to the Movil bid succeeding.

"In our view, American Movil was 'forced' to this by the E-Plus deal," he said.

Once Movil controls KPN, Slim could either demand a higher price for E-Plus, or more likely, block the sale entirely.

"Without E-Plus, there is limited strategic value in KPN," he said.

He reasoned there was little chance Telefonica would try a counteroffer for KPN, given Movil's 30 percent stake, and little chance that Dutch governance rules would let KPN's boards torpedo a relatively attractive offer.

Movil said Friday its offer for KPN will be dependent on receiving at least 50 percent of KPN's shares and there being "no competing transactions having been announced or made by any party."

KPN, which once advised investors not to sell shares to Slim, said its board and managers would appraise the potential benefits of a Movil takeover "consistent with their fiduciary duties and their commitment to the continuity of KPN and the interests of all stakeholders."

Movil built its stake in KPN over the past two years, in its first major foray outside Latin America. KPN's shares were worth more than $8 apiece when it began.

KPN has run into financial trouble after the increasing use of smartphones began eating into margins in the Netherlands, where KPN has 40 percent of the mobile market. Customers with smartphones decided to ditch KPN's highly priced SMS text messaging service en masse for cheaper Internet-based services such as WhatsApp and Skype, and KPN's profits plunged.

Then KPN paid more than it had expected to the Dutch government in an auction for fourth generation mobile licenses, loading its balance sheet with debt.

In May, the company issued 3 billion euros worth of new shares in order to avoid a repeat of the near-insolvency it suffered in the early 2000s. Even after the share issue, KPN carried 9.5 billion euros in debt at the end of the second quarter.

It had recorded a second-quarter net profit of 107 million euros on sales of 2.94 billion euros.

Explore further: KPN reports profit drop, blames Internet phone apps

Related Stories

Mexican mogul Slim expands empire in Europe

June 15, 2012

Mexican billionaire Carlos Slim on Friday moved to spread his telecoms empire into central and eastern Europe by raising his stake in Telekom Austria to 9.9 percent with the aim of obtaining 25.9 percent.

Netherlands raises $5 billion in frequency auction

December 14, 2012

(AP)—The Dutch government says it has raised €3.8 billion ($5 billion) in an auction of its 4G high speed mobile Internet frequencies. Winning bids were submitted by Royal KPN NV, Vodafone PLC, Deutsche Telekom AG and ...

KPN posts fourth quarter loss; to issue new shares

February 5, 2013

Royal KPN NV, the largest telecommunications company in the Netherlands, said Tuesday it plans to issue €4 billion ($5.4 billion) in new shares to regain financial stability after a bad year that finished with the company ...

Carlos Slim invests $40 mn in Shazam music app

July 8, 2013

Mexican telecoms tycoon Carlos Slim has acquired a 10.8 percent stake in Shazam, the British company behind a music recognition smartphone application that instantly identifies songs and artists.

Recommended for you

Smart home heating and cooling

August 28, 2015

Smart temperature-control devices—such as thermostats that learn and adjust to pre-programmed temperatures—are poised to increase comfort and save energy in homes.

Smallest 3-D camera offers brain surgery innovation

August 28, 2015

To operate on the brain, doctors need to see fine details on a small scale. A tiny camera that could produce 3-D images from inside the brain would help surgeons see more intricacies of the tissue they are handling and lead ...

Team creates functional ultrathin solar cells

August 27, 2015

(Phys.org)—A team of researchers with Johannes Kepler University Linz in Austria has developed an ultrathin solar cell for use in lightweight and flexible applications. In their paper published in the journal Nature Materials, ...

Interactive tool lifts veil on the cost of nuclear energy

August 24, 2015

Despite the ever-changing landscape of energy economics, subject to the influence of new technologies and geopolitics, a new tool promises to root discussions about the cost of nuclear energy in hard evidence rather than ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.