America Movil SAB (AMXL) withdrew its 7.2 billion-euro ($9.7 billion) offer for shares of Royal KPN NV (KPN) after talks broke down with the Dutch phone carrier, striking a blow to billionaire Carlos Slim’s European strategy.
America Movil won’t proceed with the 2.40-euros-a-share tender offer even though it received authorization from the Dutch financial-markets regulator, it said today in a filing. The Mexico City-based company determined it would be impossible to meet its goal of expanding its stake to more than 50 percent.
The decision is a setback for Slim’s company in its plan to expand beyond Latin America, where wireless growth has slowed, by acquiring assets in Europe in a bet on the continent’s demand for high-speed wireless Internet. An independent foundation, set up to protect the interests of KPN’s stakeholders, impeded America Movil’s offer by using a protective measure to temporarily gain about half of KPN’s stock.
“America Movil outside of Latin America and specifically in Europe is really struggling to do good value-adding deals,” said Robin Bienenstock, an analyst at Sanford C. Bernstein & Co. in London. She has the equivalent of a sell rating on Slim’s company and a buy on KPN.
America Movil jumped 3.2 percent to 14.02 pesos at the close in Mexico City, the highest price since Aug. 8. The Hague-based KPN rose 0.5 percent to 2.43 euros at the close in Amsterdam, before America Movil announced its decision.
America Movil still holds about 15 percent of the voting equity of KPN. That would represent a stake of 30 percent in the total company if the foundation revokes its protective measure, restoring the Dutch carrier to its normal amount of shares outstanding.
In its talks with KPN and the foundation, America Movil made proposals on corporate governance, employment, social policies, national security and minority shareholder protection, Slim’s company said. KPN refused to address those proposals unless America Movil raised its price, the company said.
“KPN’s shareholders should be the ones to decide whether the price offered is fair,” the company said. “They should have had the option to sell their shares.”
Ward Snijders, a KPN spokesman, said the company is studying America Movil’s statement, as did Jeroen Beekman, a spokesman for the Dutch economic affairs ministry. Talks with the Dutch government on national security and employment were constructive, America Movil said.
The foundation only tried to facilitate the negotiations and didn’t block the deal, said Walter Samuels, a spokesman for the independent group.
“The actions taken by the foundation are detrimental not only to all KPN shareholders –- including those who wished to participate in the intended offer –- but also detrimental to clients, employees and other stakeholders of KPN who envisioned being part of a solid company with long-term vision,” America Movil said.
The companies failed to reach an agreement even after America Movil helped KPN negotiate a better price from Telefonica SA (TEF) for its German unit, E-Plus. After discussions with Slim’s company, Madrid-based Telefonica agreed in August its bid for the KPN unit to 8.55 billion euros from 8.1 billion euros. A Telefonica press official declined to comment today. The transaction is awaiting regulatory approval.
KPN had argued that a tax offset from the sale of E-Plus makes the company more valuable, people with knowledge of the discussions said earlier, asking not to be identified because the talks were private.
KPN was seeking as much as 3 euros a share from America Movil, Bienenstock said.
“They came in to make an offer for a company without fully understanding the rules of the market,” she said.
The foundation had criticized America Movil for not reaching an agreement with KPN’s management before taking its offer to the market. Still, price was the reason negotiations fell apart, America Movil said.
“I don’t think this results from their lack of experience in Europe, but more as a divergence in valuation,” said Alejandro Gallostra, an analyst at Banco Bilbao Vizcaya Argentaria SA (BBVA) in Mexico City. He has the equivalent of a sell rating on America Movil.
KPN rival Ziggo NV (ZIGGO) has also deflected a foreign takeover attempt. The cable-television company, based in Ultrecht, Netherlands, said today that shareholder Liberty Global Plc made an “inadequate” offer for the rest of its shares, and it’s uncertain whether it will receive an improved bid.
While America Movil probably won’t sell its current stake in KPN in the near future, it may seek other options to acquire assets in Europe, including adding to its holding of shares in Telekom Austria AG (TKA), Bienenstock said.
“Probably makes everyone wonder whether he goes after Telekom Austria instead,” she said. “That would be a rational thing to do.”
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