America Movil SAB agreed to buy a 21 percent stake in Telekom Austria AG from investor Ronny Pecik, deepening Mexican billionaire Carlos Slim’s foray into Europe.
Slim’s wireless company purchased 5 percent of the shares and will acquire 16 percent later this year after regulatory approval, a filing today showed. America Movil paid about 9.50 euros a share, said a person with knowledge of the matter, asking not to be identified because the deal is private. Telekom Austria rose 2.2 percent to 8.21 euros at 3:57 a.m. in Vienna, valuing the 21 percent stake at 766 million euros ($967 million).
The acquisition is part of America Movil’s strategy to establish footholds in Europe as the continent’s debt crisis hurts the value of telecommunications assets. Slim’s Mexico City-based company is also offering to boost its stake in former Dutch phone monopoly Royal KPN NV to 27.7 percent.
“America Movil is clearly keen on coming to Europe,” said Bernd Maurer, an analyst at Raiffeisen Centrobank in Vienna. “With an investor like Pecik holding a sizable stake, Telekom Austria was a logical target.”
Telekom Austria’s enterprise value compared with earnings before interest, taxes, depreciation and amortization was 4.6 times in the last 12 months, versus a European industry average of 5.2 times.
America Movil slipped 0.5 percent to 16.72 pesos at 8:58 a.m. in Mexico City.
America Movil said the deal is part of its geographic diversification strategy and will provide an attractive presence in Central and Eastern Europe. Telekom Austria Chief Executive Officer Hannes Ametsreiter said he welcomes Slim as a strategic and long-term investor who will contribute with its industry knowledge.
Telekom Austria, based in Vienna, has operations in Belarus, Bulgaria, Croatia, Liechtenstein, Macedonia, Serbia and Slovenia in addition to the carrier’s domestic network. The company had 20.3 million wireless subscribers and 2.6 million fixed lines at the end of March.
Pecik holds his stake together with Egyptian billionaire Naguib Sawiris. Both investors made a “nice profit” from the transaction, Sawiris said in an interview.
Austria’s state assets agency OeIAG, which holds 28.4 percent and is Telekom Austria’s biggest shareholder, said it welcomes America Movil taking a stake. Slim may be exploring the possibility of accumulating a greater stake, if he secures the support of the government, the person said.
OeIAG spoke with several potential investors about Pecik’s stake in the company, according to a statement. It was looking for someone who would commit to the headquarters in Vienna for Austria and central and eastern Europe, maintain a listing on the Vienna Stock Exchange and follow a sustainable growth strategy, it said.
“America Movil has met those goals in a convincing way,” OeIAG CEO Markus Beyrer said.
In November, Austria amended a law to limit ownership of infrastructure companies by non-Europeans. A new clause in the country’s Foreign Trade Act states that stakes of 25 percent or more require approval by the Ministry of Economics unless the investor is from the European Union, the European Economic Area or Switzerland.
It is unlikely that Slim will gain full control of Telekom Austria, Dominik Klarmann, an analyst at HSBC Trinkaus & Burkhardt AG, said in a June 13 research note. He has a neutral rating on the stock.
“We see no indication that the state is willing or in need to sell its stake,” Klarmann said. America Movil “could be taking advantage of attractive valuations” and “targets operating in countries that present less economic risk.”
Telekom Austria has stakes in wireless carriers in seven eastern European countries. While the former Austrian monopoly originally built its international network to compensate for slowing growth at its home market, weakening economies and currencies in eastern Europe have hurt its earnings.
Telekom Austria, the subject of parliamentary corruption hearings in the last year over improper payments, has been slashing jobs in Austria to cut costs. The company reported net income of 46.9 million euros in the first quarter, compared with a loss of 79.2 million euros a year earlier.
The company’s operations in Belarus, where Telekom Austria bought the country’s second-biggest mobile-phone company in 2007, continue to be a drag on earnings. Hyperinflation in Belarus and foreign-exchange translations reduced sales by 96.5 million euros in the first three months of the year.
With the purchase of the 5 percent stake, America Movil said it owns 6.7 percent of Telekom Austria and would own 23 percent when the additional 16 percent stake is acquired. Pecik will remain vice chairman of Telekom Austria’s supervisory board, America Movil said.
Slim is turning to Europe as subscriber growth slows in markets such as Brazil and Mexico. Slim’s son, America Movil Co-Chairman Carlos Slim Domit, said last month that the Mexican billionaire sees Europe’s debt crisis as a “good moment” to apply his strategy of investing in times of trouble.
America Movil in May made an unsolicited offer of 2.6 billion euros to increase its stake in KPN. KPN said the offer is low and hired investment banks to explore options. The KPN offer follows failed attempts in the past decade to enter Spain and Italy, and America Movil also considered purchases in the past 18 months in Poland and Serbia.