KPN Selling New Shares at Discount to Raise 3 Billion Euros

Royal KPN NV, the Dutch company holding a 3 billion-euro ($3.9 billion) stock sale to fund its phone networks, set the terms at a discount of 62 percent from the stock’s closing price yesterday.

KPN is offering 2.84 billion shares at 1.06 euros each, compared with yesterday’s close of 2.78 euros in Amsterdam. The stock dropped as much as 7.1 percent, the most in two months. Carlos Slim’s America Movil SAB has agreed to buy shares proportional to its stake in the carrier.

“The deep discount is basically forcing all shareholders who still own KPN shares to subscribe,” said Corne Aben, a fund manager at Amsterdam-based Optimix Vermogensbeheer who holds about 150,000 KPN shares. “If you don’t take part, you will face a huge dilution of your stake and lose quite a lot of money.”

The Dutch phone company is seeking to strengthen its balance sheet after spending 1.35 billion euros on wireless spectrum to serve consumers seeking faster mobile networks amid growing use of smartphones for surfing the Web, downloading music and watching videos. This week, the carrier said it would scrap dividends planned for 2013 and 2014.

KPN traded 5.5 percent lower at 2.63 euros at 12:44 p.m. in Amsterdam, valuing the company at 3.8 billion euros.

35% Discount

Investors are entitled to buy two offered shares for each share right they hold. KPN said the theoretical share price after the rights issue is 1.63 euros. That means the 1.06-euro price is a 35 percent discount, said Marc Hesselink, an analyst at ABN Amro Bank NV.

The rights offer starts tomorrow and will run through May 14. The deal follows hybrid-bond sales in March that included $2 billion of debt denominated in euros and pounds and $600 million denominated in dollars.

“The proceeds will be used to reduce our net debt, and this will give us the financial flexibility to support the execution of our strategy,” Chief Executive Officer Eelco Blok said in a conference call today, adding the company plans to invest in infrastructure and customers in the Dutch, Belgian and German markets.

Blok attempted unsuccessfully to defend KPN last year against a 2.6 billion-euro offer from America Movil for a stake in the company and failed to sell its Belgian mobile-phone unit. KPN also ended discussions on a potential merger with Telefonica SA involving its E-Plus wireless unit in Germany.

KPN continues to see significant synergies from a deal in Germany, either through in-market consolidation or through a network sharing agreement, Blok said today.

The share sale is fully underwritten by a syndicate of banks led by Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. ABN AMRO, ING Groep NV and Rabobank Groep are book runners and BNP Paribas SA, Credit Suisse Group AG, Societe Generale SA and UniCredit SpA act as lead managers.

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