America Movil SAB said it’s prepared to drop a 7.2 billion-euro ($9.5 billion) bid for Royal KPN NV after the Dutch phone company’s foundation used an option to buy shares to impede what it described as a hostile takeover.
KPN’s foundation said yesterday it exercised the option to acquire preferred shares, giving it almost 50 percent of issued and voting stock, almost enough to block America Movil’s 2.40 euro-per-share offer for majority control. KPN fell 3.4 percent to 2.21 euros at the close in Amsterdam. America Movil, Latin America’s biggest phone company, holds about 30 percent of KPN.
“It’s hard to determine whether this offer is fair,” Jacques Schraven, the foundation’s chairman, said today at a press briefing in Amsterdam. “We’ve asked whether this offer can be retracted and negotiations can be reopened. They haven’t responded to that up until now. This wasn’t an easy decision.”
Schraven said there is still time to come to a binding offer as the America Movil plan is so far only a proposal, leaving the door open for America Movil to address its concerns. The wireless company controlled by billionaire Carlos Slim is seeking to boost its stake in KPN to more than 50 percent as part of a bid to expand beyond Latin America.
America Movil won’t raise its offer “under any circumstance,” and it won’t agree to any restrictions on its ability to make management decisions if it controls KPN, said Arturo Elias, a vice president of the company’s Telmex unit and Slim’s spokesman and son-in-law.
“The foundation called our offer hostile -- that’s a total lie,” Elias said in a phone interview. “It’s been discussed with management, with the board and with the Dutch government itself, which has been very receptive and favorable, receiving us with open arms.”
America Movil had meetings with KPN as recently as yesterday and believed discussions were proceeding well until the foundation’s “surprising announcement,” Elias said. There are no other meetings scheduled, he said. Elias said he didn’t know if there were any specific commitments KPN was requesting for employees, executives, shareholders or the government.
“We gave both KPN and America Movil a bit of a push to come to a good agreement,” Schraven said. “We want as quickly as possible this to lead to concrete results.”
In a statement, America Movil said its Aug. 9 announcement of its bid intention followed consultations with KPN and is “contrary to what has been stated by the foundation.” America Movil had “substantive discussions” with KPN as recently as this week and “further meetings were scheduled to take place today,” it said.
If the foundation keeps its current position, America Movil “is prepared to withdraw its offer,” the Mexico City-based company said. America Movil gained less than 1 percent to 12.86 pesos in Mexico City.
“Negotiations for AMX are getting tougher,” Gregorio Tomassi, an analyst at Banco Itau BBA in Mexico City, said yesterday in a research note, referring to America Movil’s ticker symbol. “The KPN foundation is forcing AMX to sit and negotiate on demands that are not yet clear.”
Dutch Economy Minister Henk Kamp said today his agency is willing to help resolve the KPN situation. The outcome may take weeks or a few months to determine, he said. “We had a discussion with the people of America Movil and we will have more discussions in the future,” he told reporters today in The Hague. “They explain their plans, and I explain how we look at it in the Netherlands and what exactly the interests are that are at stake.”
The foundation may be aiming to firm up conditions such as employee compensation, bonus packages and management continuity before agreeing to let the offer proceed, Tomassi said.
The foundation’s move came just after America Movil appeared to be addressing the group’s concerns. Slim’s company agreed this week to endorse the sale of KPN’s German unit to the billionaire’s biggest rival in Latin America -- Telefonica SA -- even convincing the Spanish company to sweeten its bid for the asset. After negotiating with America Movil, Telefonica increased the value of the bid for the KPN unit to 8.55 billion euros from 8.1 billion euros.
America Movil committed to vote in favor of the German deal after the foundation urged the company to make clear its position on the transaction. Now the foundation is asking America Movil to file documents that clarify how it calculated its offer. It also seeks information on commitments America Movil is making on technology, employment, strategy and governance, it said.
“The foundation believes that America Movil has knowingly opted for a hostile approach by not first trying to reach agreement on a merger protocol with KPN,” the group said in a statement. America Movil also submitted an offer document to the Netherlands Authority for the Financial Markets without consulting with KPN, the foundation said.
The foundation said it continues to support the German transaction, leaving Telefonica’s deal assured.
Slim’s company is also contending with opposition from KPN’s works council, which asked Dutch lawmakers to help block the takeover. KPN’s unions want a guarantee that KPN’s strategy will be continued and solid assurances from America Movil for the future of KPN’s employees, according to Joost van Herpen, a delegate for the Abvakabo union.
The foundation is in charge of defending the interests of KPN’s shareholders, employees and customers, as well as Dutch society. It has existed since the Dutch government first sold shares in KPN in 1994. On its board are Schraven, Vice Chairman Pieter Bouw, Hans Zwarts, Jan Klaassen and Peter Wakkie.
The group’s call option allows it to obtain the KPN shares for at least 25 percent of their nominal value, which is 0.24 euro a share, according to the foundation’s website. The foundation didn’t say how much it paid to acquire the 4.26 billion shares it obtained. The group has a financing arrangement with Dutch banks to fund the share acquisition.