Report: KPN looking to spin off German E-Plus unit

The prospect of KPN spinning off its German mobile unit is looking more likely following further discussion over a co-ordinated IPO approach with Telefónica and its O2 Germany subsidiary, according to a Financial Times report.

The report, which cited unnamed sources familiar with the situation, said KPN is keen to move forward with its plans to spin off E-Plus, with an announcement is likely within two weeks. KPN is under pressure from shareholders to present alternative options to the offer from América Móvil which is seeking to buy up to 28 per cent of KPN at €8 per share.

A successful IPO of E-Plus would divert shareholder attention--if KPN is able to attract a sufficiently high price for the German unit--and potentially stop this initial bid from América Móvil from gaining investor support.

Talks between KPN and Telefónica over co-ordinating their German IPOs are said to be progressing, with "enough movement between parties" to keep the exploration promising, a person familiar with the situation told the Financial Times.

Telefónica has long had an interest in acquiring E-Plus but has been effectively stopped from making a bid by its heavy debt, and last week said it would not be looking to acquire any KPN units.

Industry analysts believe that a co-operation between E-Plus and O2 could unlock some €4 billion in annual synergies in the German mobile market, on the condition that it was approved by regulators.

"A merger of E-Plus and O2 Germany would add enough value to KPN's share price to deter investors from accepting América Móvil's bid--and may even force an increase--in which case management would be able to argue it had acted resolutely for shareholders," brokerage firm Espirito Santo wrote in a note carried by the Financial Times.

Separately, Telefónica has agreed to sell a 4.56 per cent stake in China Unicom back to the parent company in return for €1.13 billion. The company said in a regulatory filing that the planned sale of more than 1.07 billion shares in China Unicom "forms part of the proactive management of its asset portfolio," according to Dow Jones Newswire.

This move will leave the Spanish operator a 5.01 per cent stake in China Unicom, and follows the sale of its 2 per cent shareholding in Portugal Telecom.

For more:
- see this Financial Times article (reg. req.)
- see this Dow Jones Newswires article

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