Ahead of an upcoming EGM at which KPN shareholders will vote on its proposed rights issues, doubts over KPN key shareholder America Movil’s (AMX) approval are mounting.
Carlos Slim’s AMX is reportedly unlikely to support KPN’s proposed €4bn…
Ahead of an upcoming EGM at which KPN shareholders will vote on its proposed rights issues, doubts over KPN key shareholder America Movil’s (AMX) approval are mounting.
Carlos Slim’s AMX is reportedly unlikely to support KPN’s proposed €4bn (US$5.4bn) rights issue unless conditions which would ultimately give it still greater influence over the Dutch telco are met.
AMX, which secured a 27.7% stake in KPN last year, may demand a seat on the company’s board as well as a replacement for CEO Eelco Blok, Bloomberg reported, citing unidentified people familiar with the matter.
According to the report, AMX will almost certainly not take part in the planned rights issue, first announced on 5 February, unless some conditions are met.
A decision on the matter is expected to be made at an EGM on 19 March.
“Carlos Slim has the firepower to consolidate KPN if he wants to do it,” Morningstar senior equity analyst Allan Nichols told TelecomFinance. “It will be interesting to see what he chooses to do”.
Sanford C Bernstein senior analyst Robin Bienenstock said in a report today that her team thinks AMX has no incentive to support the rights issue, let alone buy out the company.
“AMX would not buy KPN because a full purchase price … (at €3.90 a share, or a 20% premium to the closing price as of 11 February) would be completely transformative to their business, increasing net debt by nearly 80% and taking leverage to ~1.9x.” Such a move would also see AMX’s EBITDA growth slow from close to 4% to near zero, she said.
Bienenstock thinks AMX is most likely to block the rights issue to avoid dilution. She added that the Mexican telco may prefer KPN to take advantage of “generous credit markets” to refinance debt with a hybrid instrument, even if it means accepting junk status.
KPN posted a loss of €162m for the final quarter of 2012. Announcing the results on 5 February, the company said proceeds from the rights issue would be used to cut debt and make investments. The telco said it might still look at other options, noting that it could raise parts of the overall amount of €4bn through equity-linked or other capital instruments.
KPN’s share price dropped nearly 21% on the day of the announcement to €3.248. At the time of writing, the company’s shares were trading at €3.276.
