Last updated: August 9, 2013 6:32 pm

América Móvil in €7.2bn KPN bid

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Carlos Slim’s América Móvil has made a bid to acquire KPN, the 160-year-old former Dutch telecoms monopoly, through a cash offer for the 70 per cent not already owned by the Mexican group.

On Friday, América Móvil, the telecoms company controlled and chaired by the billionaire Mr Slim, offered €2.40 per share for KPN – which represents a 20 per cent premium to Thursday’s the closing price of €2.

Shares in KPN opened up 18 per cent on Friday at €2.38 in Amsterdam. Before that rise, the shares had lost half of their value in a year.

Given that América Móvil already owns about 30 per cent of KPN, the bid would value the remaining stake in the company at about €7.2bn. KPN said it would consider the offer.

The move follows an attempt by KPN to sell its German business E-Plus to Telefónica for €8.1bn in cash and stock. However, at that price, the deal would crystallise some of the losses incurred by América Móvil in its ill-fated European acquisition drive, and was not supported by the Mexican group.

Its bid for the whole of KPN has therefore been described by some analysts as a means to push Telefónica into raising its price in the German deal, which will go before KPN’s shareholders for approval long before the tender offer from América Móvil.

América Móvil said it was still deciding its view on the German transaction, and some analysts suggested it was significant that there was no attempt to end the deal in the conditions of its offer.

One person familiar with the situation said the move reflected a desire on the apart of América Móvil to raise its stake in KPN, without necessarily seeking full ownership of the group.

KPN will work with América Móvil in the next few weeks to agree a package that is acceptable to shareholders, said one informed person. Telefónica has also spoken to KPN following the América Móvil offer, according to those close to the companies.

On Friday, Telefónica said its offer to buy E-Plus was considered definitive.

América Móvil’s bid for one of the few former national telecoms incumbents in Europe comes at time when the region’s industry has been ravaged by economic malaise, fierce competition and increased regulation.

KPN can trace its origins back to the first Dutch telegraph lines built by the government in 1852, and it remained in state hands until the telecoms deregulation of the late 1980s. KPN was listed in Amsterdam in 1994, and by 2012 had full-year revenues of €12.7bn, from 45.1m customers.

But one legacy of state ownership that remains in place is the KPN Foundation, which was established when the Dutch government first privatised the company and holds preferred shares that enable it to block an offer.

The foundation’s charter is to defend the interests of KPN shareholders, customers and workers. That broad remit could prompt the foundation to intervene if the deal becomes politically controversial – particularly in the context of recent debates over electronic privacy.

One analyst who asked to remain anonymous noted that a takeover would mean that “an individual Mexican entrepreneur [would] control the majority of Dutch national telecommunications infrastructure”.

However, a statement by the Dutch ministry of economic affairs suggested it was unlikely to intervene. The ministry said the decision to sell KPN “is up to the various shareholders, not to the government” and that its chief concern is competitiveness in the Dutch telecom market.

América Móvil’s bid also raises the prospect of a counter offer from Telefónica to protect its German deal, said Robin Bienenstock, an analyst at Bernstein.

“It’s another sign that diversifying outside of Mexico is of paramount importance for Carlos Slim,” Ms Bienenstock said. “It’s not over. The question is, what’s next and how does Telefónica respond?”

On paper, América Móvil has been facing losses of up to half the value of its €4bn investments in KPN and Telekom Austria. Its move for the rest of KPN would throw more money at the problem and bring Mr Slim firmly into the consolidating European telecoms industry. Doing the deal might also trigger a ratings downgrade as América Móvil would need to increase its leverage.

“It’s a real mess for everyone else in Europe, because Carlos Slim is a much less likely consolidator,” said Ms Bienenstock. “It’s also lousy for América Móvil, because you’d have to pour money in KPN to fix what is a truly broken German operation.”

Additional reporting by Henry Mance

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