Dutch telco KPN has agreed to book a loss of about €3.7bn (US$5bn) when it completes the sale of German unit E-Plus to Telefonica – a move some suggest could lead to an improved takeover offer from Carlos Slim’s America Movil (AMX).
KPN, the…
Dutch telco KPN has agreed to book a loss of about €3.7bn (US$5bn) when it completes the sale of German unit E-Plus to Telefonica – a move some suggest could lead to an improved takeover offer from Carlos Slim’s America Movil (AMX).
KPN, the subject of a €7.2bn takeover bid by AMX, announced today that the agreement with the Dutch tax authorities is expected to offset its taxable income in the Netherlands in the “coming years”, starting 2014. The statutory tax rate in the Netherlands is 25%.
Capital gains and dividends concerning KPN’s 20.5% shareholding in Telefonica Deutschland (O2), to be acquired as part of the E-Plus transaction, will be subject to Dutch income tax, the Amsterdam-based telco said.
KPN CEO Eelco Blok noted the agreement affords the company certainty over its tax position in the coming years. “It is another important step for KPN to continue to invest in its operations and the latest technologies in the Netherlands.”
Spanish telco Telefonica upped its offer for E-Plus €8.1bn to €8.55bn in late August, persuading AMX to commit to voting for the deal at a meeting on 2 October.
Last Thursday, KPN and AMX confirmed they are still in talks about the latter’s intended €2.40 per share offer for the close to 70% of shares it does not already own. However, the ‘poison pill’ planted by the foundation charged with protecting KPN and its shareholders in late August, giving it almost 50% of the voting rights, has called the deal into question.
Nomura analysts estimate the tax agreement on book losses adds about €0.16 per share (a total €690m) of net present value to its fair valuation of KPN and could lead to an increased offer from AMX.
In their view, the agreement also affords KPN security if the AMX deal falls apart.
“Although a withdrawal from AMX would remain a negative outcome for the shares, this ruling, coupled with sweetener obtained on E-Plus, adds about €0.25 to the pre-offer level of €2, offering downside protection if the offer is derailed.”
The Nomura analysts believe the tax agreement and sweetened E-Plus offer strengthen KPN’s case for a higher offer price from AMX.
On the other hand, they noted that AMX previously said it will not increase its intended offer, expected sometime this month.
Last Friday, European Competition Commissioner Joaquin Almunia was quoted as saying the commission intends to review the E-Plus deal.
