Bloomberg News

Slim Wins in Europe as KPN Stake Reaches His Goal of 28%

June 28, 2012

Billionaire Slim Wins 28% KPN Stake to Expand Europe Influence

An employee helps a customer at an America Movil SAB Telcel store in Mexico City. America Movil, based in Mexico City, is seeking a long-term alliance with KPN that may include partnerships for roaming, marketing and joint purchasing. KPN, the former Dutch phone monopoly, failed to find an alternative to the bid, which it had described as “opportunistic.” Photographer: Susana Gonzalez/Bloomberg

America Movil SAB (AMXL), Mexican billionaire Carlos Slim’s wireless carrier, won the 28 percent stake it sought in Royal KPN NV (KPN), increasing its influence in Europe even after opposition from the Dutch operator.

After expanding its holding in KPN to 24.9 percent through market purchases, America Movil accepted 40 million shares through a tender offer of 8 euros a share, Slim’s company said yesterday. That took America Movil’s stake to almost 28 percent, its limit under the tender offer.

America Movil, based in Mexico City, is seeking a long-term alliance with KPN that may include partnerships for roaming, marketing and joint purchasing. KPN, the former Dutch phone monopoly, failed to find an alternative to the bid, which it had described as “opportunistic.”

“Obviously shareholders thought the offer wasn’t as bad as some people said,” said Alejandro Gallostra, an analyst at Banco Bilbao Vizcaya Argentaria SA (BBVA) who recommends buying America Movil shares. “The next step will be both companies’ management working together to see what synergies they can get.”

KPN gained 0.4 percent to 7.35 euros at the close in Amsterdam, valuing the company at 10.5 billion euros ($13.1 billion). The Hague, Netherlands-based KPN’s stock hasn’t closed higher than America Movil’s 8-euro-a-share offer since the bid was announced on May 7.

Expanded Stake

America Movil climbed 0.2 percent to 17.24 pesos at the close in Mexico City. Including its share purchases and the tender offer, the company spent about 3.07 billion euros to expand its KPN stake, according to a filing today.

Maryse Ducheine, a KPN spokeswoman, said by telephone that the company has taken notice of the expanded America Movil stake. She declined to comment further.

KPN investors tendered a total of 562 million shares, representing 40 percent of shares outstanding in the Dutch company, America Movil said yesterday. Because it doesn’t want to surpass a 28 percent stake, America Movil will only accept 40 million of the shares.

America Movil is establishing footholds in Europe as the continent’s debt crisis hurts the value of phone companies in the region. America Movil said June 15 it agreed to buy 21 percent in Telekom Austria AG (TKA) from investor Ronny Pecik. While America Movil won’t disclose how much it’s paying for the Telekom Austria stake, the purchase would be worth about 875 million euros based on recent market prices, the Mexican carrier said today in a filing.

Market Consolidation

“Now they’re going to consolidate all these acquisitions in Europe,” Martin Lara, an analyst at Corp. Actinver SAB, said by telephone yesterday. “They want to learn the market now that they have coverage in various countries through these companies,” said Lara, who recommends buying America Movil shares.

Slim may have the chance to increase his stake in Telekom Austria after the country’s September 2013 elections. Austria’s current coalition government of Social Democrats and pro- business People’s Party is split regarding the sale of state assets, with the Social Democrats opposing divestments and the People’s Party willing to consider them.

With the acquisition of Pecik’s stake, “America Movil has effectively secured a first right of refusal on the state agency stake of 28.4 percent and thus a full bid for Telekom Austria, if it was to be privatized,” Usman Ghazi, a Berenberg analyst, said in a June 15 note to customers.

‘Adverse Conditions’

KPN said June 20 that it ended discussions on potential market consolidation in Germany, a deal the company had sought to provide more value to shareholders than Slim’s offer. KPN cited “adverse conditions” in the financial markets and didn’t identify any other party.

KPN and Telefonica SA (TEF) were evaluating options, including a merger of KPN’s E-Plus unit with Telefonica’s O2, the two smaller of Germany’s four wireless operators, people familiar with the matter said this month.

The Dutch company also plans to sell its Belgian mobile- phone division. The carrier completed a strategic review and will begin the sale process next month for the BASE unit, which people familiar with the matter previously estimated may fetch about 1.8 billion euros.

KPN’s share price could be affected by a potential operating turnaround and any change in strategy or remuneration policy that America Movil may want to implement, Javier Borrachero, a Madrid-based analyst at Kepler Capital Markets, said in a note to investors. Borrachero has a hold recommendation on KPN shares, with a price estimate of 8 euros.

If it needs to counter Slim’s growing influence, KPN could turn to its independent foundation, which can issue shares that carry voting rights. The foundation has responsibility for defending KPN from “influences that may threaten the continuity, independence and identity” of the company, according to its annual report.

To contact the reporters on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net; Martijn van der Starre in Amsterdam at vanderstarre@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Mariajose Vera at mvera1@bloomberg.net


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