KPN Sees America Movil Keeping Stake as Takeover Snubbed

Royal KPN NV, whose talks with Carlos Slim’s America Movil SAB over its 7.2 billion-euro ($9.7 billion) takeover offer broke down last month, sees the Mexican carrier holding on to its stake in the Dutch company.

“Looking at where the share price is today, looking at our expectations of the financial performance of KPN, taking into account the average price they have for their current 29.7 percent stake, I think they will keep their stake,” KPN Chief Executive Officer Eelco Blok said at an investor conference in Barcelona yesterday. “That’s my analysis of the situation.”

Slim’s proposal to boost its KPN holding to majority failed primarily because of price, Blok said. While the two companies still had disagreements about governance and other non-financial commitments, KPN refused to negotiate further after America Movil wouldn’t raise its offer, he said.

America Movil had proposed to pay 2.40 euros per share for KPN before withdrawing its offer in October. KPN traded at 2.45 euros at 9:24 a.m. in Amsterdam. Before backing out of the bid, Slim had helped KPN negotiate a better price from Telefonica SA for its German unit E-Plus. Blok said he sees regulators approving the deal by mid next year.

“We are confident the regulator will be positive about the deal,” Blok said. “Of course there will be some remedies as part of the approval process, but I’m not going to speculate on that.”

A press official at Mexico City-based America Movil declined to comment yesterday.

Synergies, Dividends

KPN will probably hang on to the 20.5 percent of Telefonica Deutschland that it will get as part of the E-Plus sale, though no final decision has been made, Blok said.

“It could be very attractive for KPN shareholders given the synergy potential and dividend potential to keep the stake,” he said. “My current view given my current understanding of the German market is it is a valuable part of the portfolio of KPN.”

After the German transaction, KPN is considering options for the 5 billion euros it will receive in cash, such as share buybacks, ways to compensate the reduction in earnings before interest, tax, depreciation and amortization, improve the business profile, or acquisitions.

“Of course share buybacks are on the list, but I can assure you it’s on the back half of my list,” Blok said. “We want to have financial flexibility in the balance sheet because we believe there are still small opportunities for in-market consolidation in the Netherlands.”

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