Carlos Slim gives thumbs up to Telefónica's improved E-Plus offer

Carlos Slim's América Móvil has finally given its blessing to the planned acquisition of KPN's German unit by Telefónica after the Spanish and Dutch giants agreed improved terms that raised the total offer to €8.55 billion ($11.4 billion) from the original €8.1 billion.

Approval by the Mexican operator should help smooth the path for Telefónica's E-Plus acquisition, the success of which had been regarded as more uncertain after América Móvil revealed its own intention to buy all outstanding shares in KPN; it currently owns just under 30 per cent of the Dutch operator.

"Positive news, which reduces the uncertainty for the operation following the takeover bid for KPN by América Móvil," Spain's Banco Sabadell said in a note to clients, reported Reuters.

For its part, América Móvil's move is seen as an attempt to overcome obstacles to its €7.2 billion offer for KPN. The Mexican group has already been criticised by the KPN Foundation for not being clear about its intentions with regard to E-Plus.

"The foundation has said they want América Móvil to be clearer on their intentions on E-Plus and now they've done so," Emmanuel Carlier, an ING Groep NV analyst, told Bloomberg. "It no longer makes sense for the foundation to act."

Following negotiations between América Móvil, Telefónica and KPN, KPN will retain 20.5 per cent of Telefónica Deutschland after the completion of the E-Plus acquisition, rather than the originally agreed 17.6 per cent. KPN will receive the €5 billion cash consideration that was originally agreed.

KPN will also provide a call option to Telefónica to acquire a 2.9 per cent stake in Telefónica Deutschland from KPN at a price of €510 million, only exercisable one year after completion of the transaction.

"As a result of the improved terms, América Móvil has provided an irrevocable commitment to vote in favour of the proposed transaction at KPN's Extraordinary General Meeting related to the sale of E-Plus" on Oct. 2, KPN said in a statement on Monday.

América Móvil issued its own statement to confirm it would support the transaction at the meeting, and added that it "remains committed to its announced plans and intentions to make (directly or through a wholly owned subsidiary) a voluntary public offer in cash for all issued and outstanding ordinary shares in the capital of KPN at an offer price of €2.40 per share."

While the news is seen as generally positive for KPN and América Móvil, some analysts believe that Telefónica is the loser in the new arrangement as it now risks overpaying for the German unit.

"Telefónica has finally ceded," Javier Mielgo, an analyst at Mirabaud Finanzas in Madrid, told Bloomberg. "It is a way to secure the deal by putting about €500 million on the table. Telefónica isn't overpaying too much as it has in past acquisitions such as Vivo in Brazil, but the new terms are not as attractive for Telefónica shareholders anymore."

The acquisition of E-Plus by Telefónica is still subject to regulatory approval and is expected to be completed in mid-2014. Once completed, E-Plus will merge with O2 Germany to create the country's largest mobile operator in terms of subscribers, with a customer base of 43 million.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Bloomberg article

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