Carlos Slim’s America Movil (AMX) is to bid about €7.2bn (US$9.6bn) to acquire Dutch telco KPN, potentially jeopardising the sale of the latter’s German unit to Telefonica.
Mexico-based AMX announced today that it intends to make a tender offer…
Carlos Slim’s America Movil (AMX) is to bid about €7.2bn (US$9.6bn) to acquire Dutch telco KPN, potentially jeopardising the sale of the latter’s German unit to Telefonica.
Mexico-based AMX announced today that it intends to make a tender offer in cash for the just over 70% of KPN shares it does not already own. The €2.40 per price tag values the target stake at about €7.2bn and the whole company at about €10.2bn.
This compares with Spanish telco Telefonica’s €8.1bn bid for KPN’s German mobile unit E-Plus. KPN, which had announced the sale to Telefonica Deutschland (O2) in late July, is expected to convene an EGM to gain shareholder approval within the coming weeks.
AMX’s €2.40 per share offer price represents a 20% premium on Amsterdam-listed KPN’s trading price at market close yesterday. The Mexican telco said it implies an approximate 35.4% premium on KPN’s average closing price over the past 30 trading days. The bid is conditional upon AMX winning a stake of more than 50%.
AMX said it will submit an offer memorandum to the Netherlands’ financial markets authority for approval “expeditiously”, aiming to make a formal offer in September. The company has invited KPN’s supervisory and management boards to meet “as soon as possible” to discuss the intended offer and “potential terms for a long-term constructive relationship”.
AMX, which offered €8 per share to boost its stake in KPN to 27.7% in mid-2012, explained that the bid forms part of its expansion strategy outside the Americas. The company said it is aiming for “greater operations cooperation and coordination” with KPN to “exploit all areas for potential partnerships and to intensify the realisation of synergy potential for both companies”.
As a KPN shareholder, AMX said it is still carefully evaluating the proposed E-Plus deal and will make a final decision at the Dutch telco’s upcoming EGM.
The intended offer comes shortly after AMX ended a standstill “relationship agreement” with KPN, which had prevented it from boosting its stake to more than 50%.
In its own short statement, KPN said its boards were informed in advance of AMX’s intended offer, saying they will carefully consider it in line with their fiduciary duties and commitment to all company stakeholders. The telco noted it will “explore all strategic options”. KPN also reiterated its intention to hold an EGM to discuss the proposed deal with Telefonica within the coming weeks.
Bernstein Research analysts said in a note to investors that Telefonica could come in with a higher counter-bid for KPN. But this would not necessarily be good for the Dutch telco, as it would reduce the value of the combined O2-E-Plus entity in which it is set to get a stake, the analysts said.
According to Bernstein, KPN is unlikely to reject AMX’s offer outright, as it would probably require KPN to make an appeal to the ‘Stichting’, an independent body charged with protecting its stakeholders from “influences that may threaten the continuity, independence and identity of the company”.
In their own note to investors, Nomura analysts described AMX’s offer price as “generous”, even though the premium does not look that way at first sight. They noted that the company is effectively offering 5% of the estimated 2014 free cash flow to equity (FCFE) yield “for a challenged domestic-centric incumbent plus a potential of synergies in Germany that is fully crystallised by the deal offered by Telefonica”.
The Nomura analysts predict that KPN is likely to decide the “cosmetically low” premium is not high enough. However, they noted AMX would probably still try to increase its stake in the company. The Mexican telco could even take control of KPN if it decides to waive the 50% voting right level. “[T]hey can perfectly control the company with a 40-45% stake without going through the pain of consolidating the asset,” they said.
In their view, AMX seems to have reservations about the proposed E-Plus deal. However, they noted that even if it votes against it, AMX is likely to look at alternatives as “extracting synergies in Germany is the most obvious pool of value creation for KPN”.
Telefonica maintains E-Plus offer
Telefonica has since confirmed that it stands by its offer for E-Plus.
“Telefonica confirms that it maintains its offer to buy E-Plus under the terms already announced and considers it definitive,” a company spokesperson said this afternoon. The spokesperson declined to comment further on the topic.
