America Movil Free to Raise KPN Stake as Pact Ends

Billionaire Carlos Slim’s America Movil SAB ended an agreement with Royal KPN NV that capped the Mexican company’s stake in the Dutch phone carrier at about 30 percent, clearing the way for it to boost its stake.

KPN shares jumped as much as 5.6 percent after KPN and America Movil, its largest shareholder, said the Feb. 20 pact is being terminated immediately. If it raises its stake above 30 percent, Mexico City-based America Movil would have to bid for all of the company’s shares, according to Dutch law.

Slim now has more freedom to use KPN to expand in Europe as the region’s telecommunications market consolidates. America Movil spent about $4 billion increasing its stake in KPN last year, after bidding 8 euros a share. The stock now trades at less than 2 euros.

“We still believe America Movil came to Europe to have a stronghold in several countries, not to consolidate or break up KPN,” said Javier Borrachero, an analyst at Kepler Capital Markets, in a note today

KPN traded 4.6 percent higher at 1.98 euros at the close in Amsterdam. The stock had fallen to 1.39 euros in June. America Movil slid 3.3 percent to 13.34 pesos. It has lost 10 percent this year in Mexico City trading.

German Deal

America Movil didn’t say in its statement whether it plans to raise its holding in former Dutch phone monopoly KPN.

To buy KPN outright, America Movil would need to cancel a share buyback and obtain $4 billion of debt financing, Sanford C. Bernstein & Co. analysts said in a note last week. It could also partner with AT&T Inc. for a bid, they said.

Last week, KPN agreed to sell its German wireless carrier E-Plus to Telefonica Deutschland Holding AG, controlled by Spain’s largest phone company and owner of the O2 brand in Germany, in a deal valued at 8.1 billion euros ($10.7 billion). It’s unclear whether Slim personally supports the E-Plus sale, two people familiar with the matter have said.

“The deal is likely to go through as it would be hard for America Movil to scupper a deal at a vote in the absence of a better alternative and we do not think America Movil has the balance sheet to muster one,” Robin Bienenstock, an analyst at Sanford, said in an e-mail.

Board Members

America Movil may keep its two nominees on KPN’s supervisory board as long as it holds a stake of 20 percent or more, the companies said.

“America Movil has continued to evaluate the expansion of its operations in other regions outside the Americas,” the company said last year in a statement. “Geographic diversification is a key element that has provided great stability to its cash flow and profitability.”

The Netherlands is emerging as one center of dealmaking activity as intensifying competition and slowing sales in Europe’s telecommunications industry is leading to consolidation. John Malone’s Liberty Global Plc said last week it raised its stake in Dutch cable-television operator Ziggo NV, a KPN rival, to 28.5 percent from 18.2 percent, which it said was for strategic reasons.

Ziggo shares jumped as much as 5.9 percent to 29.60 euros and were up 4.1 percent at 29.08 euros at 11:48 a.m. in Amsterdam.

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