Slim's €7.2B move on KPN raises questions about E-Plus deal

Carlos Slim's América Móvil said it intends to make a €7.2 billion ($9.6 billion) offer for all shares that it does not already own in Dutch operator KPN, marking a further move in the shifting European telecoms landscape and raising questions about Telefónica's recent €8.1 billion bid for KPN's German business, E-Plus.

The América Móvil bid follows the termination of its agreement to limit its stake in KPN, which opened the door to the possibility that the Mexican-based company would raise its stake beyond the almost 30 per cent it currently owns.

In a statement,  América Móvil said it intends to offer €2.40 per share, which reports say value the outstanding 70 per cent stake in the Dutch operator at around €7.2 billion. América Móvil said it expects to make a formal offer in September once Dutch financial markets authorities have approved an offer memorandum. One condition of the purchase is that América Móvil would want to hold more than 50 per cent of KPN's voting rights.

KPN issued a short statement in which it said it will "carefully consider América Móvil's intended offer."

Explaining its rationale behind the bid, América Móvil said it has been exploring opportunities in recent years to expand its operations to other regions outside the Americas in order to achieve geographical diversification and create attractive long-term returns for its shareholders. KPN represented its first investment outside of the Americas more a year ago, and was followed by the purchase of a minority stake of around 24 per cent in Telekom Austria in June 2012.

So far the investments have not performed well; the Financial Times reported that América Móvil owner Carlos Slim has lost more than €2 billion on paper on the two investments. However, Slim seems keen to turn this situation around, as América Móvil said its objective is to acquire a majority stake in KPN "in order to facilitate greater operational co-operation and co-ordination between the two companies, to exploit all areas for potential partnerships and to intensify the realisation of synergy potential for both companies."

At the same time, the move by Slim and América Móvil has caused some analysts to question what impact this will have on Telefónica's plan to buy E-Plus. As things stand, the Mexican group has not expressly given its support for the E-Plus deal, and on Friday said it is "carefully evaluating the merits of the proposed transaction and will make a final determination in relation to the exercise of its voting rights at the upcoming extraordinary general meeting of KPN."

Robin Bienenstock, an analyst at Bernstein, told the Financial Times that América Móvil's bid for KPN raises the prospect of a counter offer from Telefónica in order to protect the German deal.

"It's another sign that diversifying outside of Mexico is of paramount importance for Carlos Slim," Bienenstock told the FT. "It's not over. The question is, what's next and how does Telefónica respond?...It's a real mess for everyone else in Europe, because Carlos Slim is a much less likely consolidator," she added.

Other analysts suggest that the billionaire will use the KPN bid as leverage to get more out of Telefónica. Will Draper, an analyst at Espirito Santo, told Reuters that there is a significant risk that América Móvil will now block the deal, and other unnamed sources told Reuters the Mexican giant views the E-Plus bid as too low.

"This move, and the fact that Slim hasn't made a decision over Telefónica's bid for E-Plus in Germany, suggests that the billionaire will seek a sweetened offer from the Spanish company," Andres Bolumburu, an analyst at Banco de Sabadell, told Bloomberg. " Telefónica's offer for E-Plus is already high and I don't see any other company being able to bid for the company."

Opposition from América Móvil to the German deal would be bad news for the Spanish company, which wants to merge its Telefónica Deutschland unit with E-Plus to create a stronger competitor to rivals Deutsche Telekom and Vodafone Germany.

For more:
- see this América Móvil release
- see this FT article (sub. req.)
- see this Bloomberg article
- see this Reuters article

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