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Slim’s America Movil to Bid for Full Control of KPN

August 09, 2013

America Movil to Make $9.6 Billion Bid for Dutch Carrier KPN

Carlos Slim is 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. Photographer: Susana Gonzalez/Bloomberg

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

America Movil will bid 2.40 euros a share in cash for the 70 percent in KPN that it doesn’t own, the Mexico City-based company said today. KPN rose 16 percent to 2.32 euros at the closing of trading in Amsterdam, and America Movil slumped as much as 7.3 percent in Mexico City. The offer, to be made official next month, is subject to America Movil winning a stake of more than 50 percent.

The twist came weeks after KPN agreed to divest its E-Plus unit to Spain’s Telefonica -- Slim’s biggest rival in Latin America -- to create Germany’s largest wireless carrier by customers. America Movil said today it hasn’t decided whether it will support the 8.1 billion-euro transaction. The sale requires approval from shareholders of KPN, which said today 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.

High Multiple

Under the July 23 agreement, KPN would get 5 billion euros in cash and a 17.6 percent in the entity created from the combination of E-Plus and Telefonica Deutschland Holding AG (O2D), 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.

The deal values E-Plus at 9 times estimated full-year earnings before interest, taxes, depreciation and amortization, according to KPN. 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.

Marisa Navas, a spokeswoman for Madrid-based Telefonica, said today Telefonica Deutschland’s offer for E-Plus is final. Stefan Simons, a spokesman at KPN, said the company took notice of America Movil’s statement and will study the proposed bid.

Losing Money

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 euros a share. Shares in Telekom Austria AG (TKA) have also slumped since America Movil acquired a stake last year.

KPN’s gains today erased the stock’s losses this year. Telekom Austria jumped 8.7 percent in Vienna, and Telefonica added 0.3 percent in Madrid. America Movil fell 5.6 percent to 13.3 pesos.

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 is advising America Movil on the KPN bid. Goldman Sachs Group Inc. and JPMorgan Chase & Co. were 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 (LBTYA:US) said last month it raised its stake in cable-television operator Ziggo NV (ZIGGO), a KPN rival, to 28.5 percent, 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 percent.

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 customers 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 percent drop in second-quarter profit, as sales rose 1.6 percent.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Crayton Harrison in New York at tharrison5@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Nick Turner at nturner7@bloomberg.net


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