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KPN Shareholders Approve Sale of German Unit to Telefonica

Royal KPN NV (KPN) shareholders approved the 8.55 billion-euro ($11.6 billion) sale of the phone company’s German business to Telefonica SA (TEF) to create the country’s largest wireless carrier by customers.

Investors who met in The Hague today agreed to the sale of the E-Plus unit to Telefonica Deutschland Holding AG. (O2D) KPN is “fully confident” that it will win regulatory approval by mid-2014, Chief Executive Officer Eelco Blok said.

“This is a very important deal for the industry,” Blok said after the meeting. “It’s the first really large deal in the largest economy in Europe, so it will be important for the future of the telcos in Europe.”

The transaction is closely watched by European carriers because any sign that regulators in Brussels are warming to consolidation within national boundaries could trigger what Orange SA (ORA) CEO Stephane Richard last month called an “earthquake.” Carlos Slim’s America Movil SAB, with an almost 30 percent stake in KPN, is also following the vote results as it weighs a bid for majority control of the Netherlands’ biggest phone company.

KPN shares fell 0.6 percent to close at 2.35 euros in Amsterdam. America Movil rose less than 1 percent to 13.48 pesos in Mexico City at 10:36 a.m.

Foundation Abstains

An independent foundation with almost half of KPN’s shares abstained from the vote.

KPN agreed to sell E-Plus to Madrid-based Telefonica’s German unit in July in an 8.1 billion-euro transaction. Telefonica sweetened its bid the following month to win the backing of America Movil.

The sale should enable KPN, which will receive 5 billion euros in cash and own 20.5 percent of the enlarged German mobile-phone company, to pay a dividend next year, Blok said. “The proceeds of E-Plus are of such a magnitude that we can continue to invest in our company,” he said.

E-Plus and Telefonica, which sells services under the O2 brand, together would have a customer base of 43.8 million as of June, surpassing Vodafone Group Plc (VOD)’s 32.2 million and Deutsche Telekom AG (DTE)’s 37.5 million in Germany, according to data compiled by Bloomberg Industries. Counting wireless-service revenue, Telefonica and E-Plus together remained smaller than Deutsche Telekom’s T-Mobile and Vodafone.

KPN Bid?

KPN is pushing America Movil to raise its 2.40 euro-a-share takeover bid to about 2.65 euros, arguing that a tax offset from E-Plus’s sale makes it more valuable, people familiar with the matter said this week, who asked not to be identified because the talks are private. America Movil is pointing to Ziggo NV (ZIGGO)’s entry into the Dutch mobile market as evidence of deteriorating prospects to justify its valuation, the people said.

“We are having constructive discussions with them,” said Blok, who added that he’s been personally running the negotiations with America Movil since Chief Financial Officer Eric Hageman stepped down last month. “It’s about the right balance between price, governance and non-financial commitments.”

America Movil, based in Mexico City, said last week it probably won’t make a formal offer until this month because it needs more time to negotiate with the Dutch carrier. KPN’s foundation, the organization set up to protect the company’s interests, exercised an option in August to acquire preferred shares to impede what it described as a hostile takeover.

To contact the reporters on this story: Adam Ewing in The Hague at aewing5@bloomberg.net; Fred Pals in The Hague at fpals@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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