Dutch telco KPN has not yet secured support from its largest shareholder, Carlos Slim’s America Movil (AMX), for the €8.1bn sale of German unit E-Plus to Telefonica Deutschland (O2).
AMX’s two representatives on KPN’s board did not vote in…
Dutch telco KPN has not yet secured support from its largest shareholder, Carlos Slim’s America Movil (AMX), for the €8.1bn sale of German unit E-Plus to Telefonica Deutschland (O2).
AMX’s two representatives on KPN’s board did not vote in favour of the deal, the Financial Times reported citing unnamed sources close to the situation. According to one source, the AMX-appointed directors attended the relevant board meeting, but it was unclear whether they voted against the deal or abstained from voting. Whatever the case, KPN’s remaining six directors voted for the deal, enough for it to progress to the next stage.
A KPN spokesperson declined to comment on the report, saying developments will be communicated in due course.
It its deal announcement KPN did not state how its board of directors had voted. The omission has prompted speculation that AMX has not committed to support the deal.
The deal, which will see KPN sell E-Plus to O2 for €5bn in cash and a 17.6% stake in the combined entity, is subject to KPN EGM and regulatory approvals.
KPN said its boards intend to convene the EGM in the coming weeks. Once called, the meeting must take place within 42 days.
O2 will also hold an EGM but, given Spanish telco Telefonica has a 77% stake in the company and has irrevocably agreed to support the deal, this is merely a formality.
The parties expect the deal to be submitted for regulatory clearance in July or August this year and to close in mid 2014.
Even if AMX has not committed to support the deal, it may still choose to do so. Earlier this year, KPN announced its €3bn rights issue without having secured its largest shareholder’s support. However, the Mexico-based telco voted in favour of the transaction at its next EGM.
Bernstein Research analysts pointed out that AMX has the right to end a standstill pact which prevents it from owning more than 30% of KPN if there are asset sales of more than €200m. As such, the E-Plus agreement entitles AMX to end the pact immediately.
At present, however, Bernstein analysts are unsure whether, as a minority investor, AMX would be able to block the deal with Telefonica.
“[T]he deal needs a simple majority vote to pass and with a less than 30% stake, AMX may not have enough votes to block the deal,” they said. “Pushing it to a vote with this level of ownership and no alternative to offer shareholders would be a very high-risk strategy and could well fail.”
In their view, AMX’s best strategy, if it wished to block the deal, would be to offer a viable alternative. They think AMX is unlikely to end the standstill pact now as its debt load and share buyback plans mean it probably cannot buy KPN outright.
The Bernstein analysts value KPN shares at €2.45 post-deal, but said “less conservative” valuations would put the Dutch telco at €2.90 after a deal.
“Mr Slim will have to come up with a lot more if he is to scupper a deal,” they said.
