March 26, 2023

DealBook: As Unwanted Suitor Looms, KPN Struggles to Find Buyer for German Unit

KPN’s last-ditch efforts to forestall a hostile bid by América Móvil, Latin America’s largest mobile operator, may have ended after it broke off talks to sell its German business.

KPN, the Dutch telecommunications company, has been trying fend off the unwanted advances of América Móvil for weeks. In May, América Móvil, which is owned by the Mexican billionaire Carlos Slim Helú, offered 8 euros a share to increase its stake in KPN to 28 percent.

After rejecting the offer, KPN moved to block América Móvil by putting its German unit, E-Plus, up for sale. While KPN never disclosed the nature of the discussions, Telefonica was the suitor, according to a person with the knowledge of the matter.

Telefonica, which is América Movil’s rival in Latin America, has reason to hamper América Movil’s move into Europe, where Telefonica is the No. 1 operator in terms of customers but has been struggling amid the economic crisis in Spain. A fusion of E-Plus and O2, Telefonica’s German carrier, would have merged the No. 4 and No. 3 carriers in the country, creating a new market leader by leapfrogging over T-Mobile and Vodafone Germany.

But a potential deal was stifled by the region’s economic woes. In a statement, the Dutch operator called off the discussions, blaming “current adverse conditions in the financial markets.”

“This means either that KPN and Telefonica couldn’t agree on a price for E-Plus or Telefonica had trouble raising financing for the acquisition,” said Jeffrey Vonk, an analyst at ING Bank in Amsterdam.

Stephen Hufton, a spokesman for KPN, said the Dutch operator was still interested in a sale or other solution for E-Plus as part of its strategy to focus on its home market.

“We believe there is still considerable value to be unlocked in the German market through consolidation but that wasn’t possible given the situation with the financial markets at this time,: Mr. Hufton said. “But that doesn’t exclude it later.’’

Even so, analysts say América Móvil now has the upper hand. Shares of KPN were down by 4 percent on Thursday, to 7.58 euros per share, below América Móvil’s offer.

“I think it is now likely that América Móvil will succeed in its bid for a bigger stake in KPN,’’ Mr. Vonk said.

Since making an offer, América Móvil has been slowly increasing its stake. America Movil said on Wednesday that it had so far acquired 8.7 percent in KPN, up from 4.8 percent when it first approached the company.

Mr. Vonk, the ING analyst, said the decline in KPN’s share price and high trading volume in the stock today in Amsterdam indicated that Mr. Slim may be moving quickly toward his goal.

“I think he is probably taking advantage of the current share price,’’ Mr. Vonk said.

América Movil’s bid for KPN is the company’s second move into Europe. On June 15, America Movil said it had reached an agreement to acquire a 21 percent stake in Telekom Austria, increasing its total stake to 23 percent in that country’s market leader, in a transaction that will conclude by the end of the year.

“I think there is certainly a possibility that América Móvil will become a factor in Europe,’’ said Pete Cunningham, an analyst at Canalys, a research firm, in Reading, England. “If you look at the economic pressures in Europe, operators are in a difficult position. And Latin America is growing faster.’’

Under Dutch law, Mr. Slim’s bid is intended to acquire the most influence at the least cost. By limiting his stake to less than 30 percent, America Movil doesn’t have to extend its offer to all KPN shareholders, as per the rules in the Netherlands.

If Mr. Slim acquires 28 percent in KPN, he could gain effect control or wield outsize influence at KPN shareholder meetings. Typically, only 45 percent of KPN investors vote, according to the operator.

“But if América Móvil does succeed in its bid, and I think it will, then the participation at KPN shareholder meetings may increase, which could dilute his influence,’’ Mr. Vonk said.

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