Carlos Slim’s America Movil (AMX) has terminated its relationship agreement with Dutch telco KPN, entitling the Mexico-based telecoms giant to launch a full takeover bid.
AMX – KPN’s largest shareholder with a stake of nearly 30% – announced in…
Carlos Slim’s America Movil (AMX) has terminated its relationship agreement with Dutch telco KPN, entitling the Mexico-based telecoms giant to launch a full takeover bid.
AMX – KPN’s largest shareholder with a stake of nearly 30% – announced in a short statement today that it has ended the agreement dated 20 February, providing no further details.
As KPN explained in its own short statement the standstill in the agreement, which prevented AMX from raising its stake to 30% or more, no longer applies.
AMX had the right to end the agreement if KPN chose to sell assets worth more than €200m.
Speculation arose last week that AMX may end the agreement if it decided not to support KPN’s move to sell German unit E-Plus to Spanish telco Telefonica in an €8.1bn deal.
The deal, announced on 22 July, is subject to the approval of shareholders at KPN’s next EGM, expected to be convened with the coming weeks.
Last Thursday (25 July), a Financial Times report cited an unnamed source as saying AMX does not oppose the sale in principle, but believes the price is too low.
On a conference call with analysts the following day, AMX CFO Carlos Garcia Moreno said the company would evaluate the terms and conditions of the agreement to sell E-Plus and make a decision when they are presented to KPN shareholders.
As AMX has a minority stake in KPN, it may not be able to block the E-Plus transaction on its own. However, as Nomura analysts pointed out in a note to investors, AMX’ vote cannot be easily overridden.
“Although their 30% shareholding can be overturned in a shareholder vote, it will require more than 60% attendance and all other shareholders voting for the deal to go through,” they explained.
The analysts said AMX is likely to have valued E-Plus at more than the approximate €7bn it will crystallise from the transaction. If AMX decides it can get more from the asset, it could vote against the deal and try to secure a higher price.
“Signalling a vote against the deal could be part of a strategy to prompt Telefonica to revise up their offer and is likely to put further pressure on Telefonica Deutschland [O2],” they said.
However, AMX could still decide to support the deal. The company did not support KPN’s rights issue when it was first announced earlier this year but decided to do so later.
The Normura analysts do not predict AMX will launch a full takeover bid for KPN given the “significant” leverage implications and the likelihood that its consolidated growth profile would weaken considerably.
Alternatively, AMX could choose to sell its stake in KPN – a move some analysts have said could make sense in light of the losses it has incurred on its investment in the Dutch telco so far.
The two AMX-appointed members of KPN’s supervisory board will remain in place as long as the Mexico-based telco maintains a stake of 20% or more. At least one will remain as long as AMX has a stake of 10% or more.
A KPN spokesperson declined to comment further on the agreement’s termination and its potential consequences.
