Carlos Slim’s America Movil SAB, which is bidding for a bigger stake in Royal KPN NV (KPN), said the investment will boost profit, helped by the Dutch phone company’s exposure to Germany and the Netherlands.
America Movil has no interest in bidding directly for KPN’s German E-Plus mobile-phone unit and regards the Dutch company’s turnaround plan as credible, America Movil Chief Financial Officer Carlos Garcia-Moreno said at a meeting in London yesterday, according to a Bank of America Merrill Lynch (BAS:US) note to clients, obtained by Bloomberg News.
The planned KPN deal may increase America Movil’s net income by 5 percent before synergies, Bank of America Merrill Lynch said, without specifying a time period. KPN is an attractive investment as it operates in “solid” countries such as Germany and the Netherlands, which are less affected by the European debt crisis. Representatives for America Movil and Bank of America Merrill Lynch declined to comment.
America Movil, based in Mexico City and owned by Slim, the world’s richest man, this month offered 2.6 billion euros ($3.3 billion) to boost its 4.8 percent stake in the former Dutch telecommunications monopoly to as much as 28 percent. KPN, based in The Hague, said the unsolicited 8-euro-per-share cash offer is too low and hired Goldman Sachs Group Inc. (GS:US) and JPMorgan Chase & Co. (JPM:US) to evaluate options.
The tender for 325 million shares will start tomorrow and conclude June 27, America Movil said today in a filing. While the deal is “sufficiently meaningful,” it is not large enough to affect or distract America Movil from its Latin American business, the CFO told investors. America Movil will be able to retain its current credit rating, Garcia-Moreno is quoted as saying.
America Movil is in no rush to reach 28 percent and is happy to accept the stake it gets in the tender, according to Bank of America Merrill Lynch. Steve Hufton, a KPN spokesman, declined to comment.
KPN shares today declined 0.6 percent to 7.59 euros at the close, valuing the company at 10.9 billion euros. The stock hasn’t closed above 8 euros since April 3. Before the offer from America Movil, KPN fell 30 percent this year, the worst performance on the Bloomberg Europe Telecommunication Services Index, as the company struggled to maintain profits while investing in its domestic broadband network. America Movil rose 1.1 percent to 16.97 pesos in Mexico City.
Slim is taking advantage of Europe’s debt crisis to find bargains, fulfilling a plan to expand beyond his Latin American phone empire. The KPN offer follows failed attempts in the past decade to enter Spain and Italy, and America Movil also considered purchases in the past 18 months in Poland and Serbia.
America Movil, the largest wireless carrier in the Americas, has in the past collaborated with AT&T Inc. (T:US), which owns about 9 percent of America Movil and is part of a group with Slim and his family that controls the company’s voting shares. It’s a relationship America Movil deems it could repeat with KPN, according to the note yesterday.
In addition to assets in the Netherlands, Germany and Spain, KPN also owns the Belgian mobile-phone operator known as Base. KPN said it has started reviewing the future of the Belgian unit, which people familiar with the matter have estimated may fetch about 1.8 billion euros in a sale.
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