America Movil Discussed Cooperation With KPN Before Offer

America Movil SAB executives, preparing for today’s tender offer to boost the company’s stake in Royal KPN NV (KPN), held talks as recently as last week on collaboration with managers at the former Dutch phone monopoly.

Top company officials discussed cooperation May 25 on buying handsets and other hardware and on The Hague-based KPN’s iBasis international long-distance unit, America Movil said in a filing. America Movil’s offer of 8 euros a share to expand its stake in KPN to as much as 28 percent ends June 27.

The talks indicate KPN Chairman Eelco Blok is considering an alliance with America Movil even as his company says the Mexico City-based carrier’s offer is too low. America Movil, controlled by billionaire Carlos Slim, is planning to spend as much as 2.6 billion euros ($3.2 billion) on the shares in its first major investment outside of the Americas.

“We have now a very large scale, and KPN is restricted by a lack of scale,” America Movil Chief Financial Officer Carlos Garcia-Moreno told reporters yesterday on a conference call. “There are a number of areas we’ve already identified, including procurement, where our scale can have an impact for the benefit of KPN’s shareholders.”

KPN rose 1.1 percent to 7.67 euros at 4:43 p.m. in Amsterdam. The stock hasn’t closed above 8 euros since April 3. America Movil climbed 0.1 percent to 16.99 pesos at 9:58 a.m. in Mexico City.

Draft Term Sheet

KPN will carefully review the partial offer, the Dutch company said in a statement today, reiterating that its management and supervisory boards see the 8 euro-a-share offer as substantially undervaluing the company.

“KPN will continue to explore all strategic options,” the company said.

Garcia-Moreno said he doesn’t know whether more meetings are scheduled between the companies’ executives.

KPN gave America Movil a draft term sheet on May 19 with suggestions related to the potential 28 percent stake, America Movil said in the filing. The Mexican company’s stake in KPN as of May 25 was 4.8 percent.

Executives’ Contacts

America Movil Chief Executive Officer Daniel Hajj contacted Blok on May 22 to inform him that the Mexican company wouldn’t accept the term sheet. He reiterated America Movil’s intent to build a “constructive long-term relationship” with KPN, according to the filing.

“It’s too early at this stage, when we’re basically trying to get to know each other, to sign any kind of shareholder agreement,” Garcia-Moreno said yesterday. He declined to discuss details of the term sheet, and the filing didn’t disclose any specific proposals in the document.

Even before America Movil announced the offer on May 7, executives from both companies were in contact. Hajj and Garcia- Moreno met with Blok and KPN interim CFO Eric Hageman on April 10 to discuss the European telecommunications industry, according to the filing. Hajj and Garcia-Moreno indicated in that meeting they were considering buying a “meaningful” stake in KPN, America Movil said in the filing.

On May 17, Hajj and Garcia-Moreno met with members of both companies’ boards to clarify America Movil’s intentions and discuss ways to cooperate, according to the filing.

“The company should be afforded the space to think more long-term,” Garcia-Moreno said yesterday. “That’s something we think we can contribute to their benefit.”

America Movil supports KPN’s management and strategy and doesn’t plan to increase its offer for the shares, he said. America Movil envisions a partnership with KPN similar to the one the Mexican company has developed over the past decade with AT&T Inc. (T), which owns 9 percent of America Movil and offers help with strategy, Garcia-Moreno said.

To contact the reporters on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net; Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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