KPN Agrees to $4.9 Billion Tax-Book Loss on German Sale

Royal KPN NV (KPN), the Dutch carrier that’s attracted a takeover bid from America Movil SAB, said a planned sale of its German wireless business will allow it to pay less in taxes on future earnings.

Dutch authorities agreed to let KPN record a tax-book loss of 3.7 billion euros ($4.9 billion) for the German sale, according to a statement today. That will offset its taxable income starting in 2014, The Hague-based KPN said.

Lower taxes may make KPN more valuable to America Movil, the Mexican phone company controlled by Carlos Slim that has said it plans to bid 7.2 billion euros for the part of KPN it doesn’t own. America Movil plans to formally file its offer as early as this week, when it also expects to get regulatory approval, an investor briefed by the company said last week.

“America Movil could now potentially increase its proposed offer,” analysts at Espirito Santo Investment Bank said in a note to clients today.

KPN rose 1.1 percent to close at 2.35 euros in Amsterdam. America Movil’s planned offer is 2.40 euros a share. America Movil was little changed at $20.21 at 12:45 p.m. in New York.

“It’s a positive formal step,” Jos Versteeg, an analyst at Theodoor Gilissen Bankiers NV in Amsterdam, said by phone. Still, America Movil may have already taken a tax benefit into account when calculating its original planned offer, he said.

Claire Verhagen, a spokeswoman for America Movil, declined to comment.

Talks Continue

KPN agreed to sell its German wireless business to Telefonica SA (TEF)’s local unit in July. The Spanish phone company sweetened its bid last month to 8.55 billion euros from 8.1 billion euros, helping it to win the backing of America Movil. Shareholders are set to vote on the German sale at an Oct. 2 meeting in The Hague.

America Movil’s bid for the rest of KPN is part of the Mexican carrier’s plan to expand beyond Latin America. To gain control of the former Dutch monopoly, it will have to persuade the independent foundation that protects KPN’s interests not to block the deal.

Last month, KPN’s foundation surprised America Movil by moving to impede the Mexican company’s takeover. The group exercised an option that creates new shares in KPN, giving it control of just under 50 percent of the company and diluting America Movil’s stake to 15 percent. The foundation said the move was necessary because America Movil hadn’t pursued the transaction in the customary Dutch manner, making its offer public before arriving at an agreement with KPN privately.

Both companies said last week they remain in talks. In a statement, America Movil said it “continues to be committed” to its plans for a 2.40 euro-a-share offer. KPN said in a separate statement that the carriers are in “continuous constructive discussions” on matters including price.

To contact the reporter on this story: Martijn van der Starre in Amsterdam at vanderstarre@bloomberg.net

To contact the editors responsible for this story: Mariajose Vera at mvera1@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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