Slim seeks to expand empire into ailing Europe
MEXICO CITY (Reuters) - A multibillion dollar offer by Mexico's Carlos Slim to raise his stake in a Dutch telecoms firm may mark the start of a push to expand his reach into Europe, where a debt crisis is opening up opportunities for the world's richest man.
Slim's principal cash cow, telecoms group America Movil, said on Monday it aimed to buy up to 28 percent of Dutch company KPN, to give the Mexican a base for future expansion in Europe.
The 72-year-old billionaire has focused his activities in the Americas over the past decade, building a fortune of more than $60 billion with the aid of rapid economic growth in countries like Brazil.
Having carved out an empire extending from the United States to Chile, Slim's plunge into the Netherlands likely signals a bet to plan ahead for when Europe emerges from the economic turmoil that has dogged it for nearly four years.
Europe has lurched from the global financial crash in late 2008 to a grinding sovereign debt crisis that has depressed share prices, opening doors to cash-rich investors like Slim.
"This is the ideal moment for Slim in Europe," said Jose Martinez, Slim's biographer in Mexico. "The business in the Netherlands would be an illustration of that. It's the spearhead to go looking for offers at this time of crisis."
America Movil already holds nearly 5 percent of KPN's stock and the company proposed paying 8 euros per share to raise the stake to 28 percent, at a cost of around $3.5 billion.
Buying in a downturn would be "typical" of Slim, who has always been keen to find a way into Europe, added Martinez.
Slim laid the groundwork for his international telecoms empire by picking up assets across Latin America when other investors panicked after the dot-com bubble burst in 2000.
But his telecoms acquisitions did not take him as far as Europe, much of which is battling recession this year.
America Movil's most visible recent attempt to tap the continent was a 2007 bid for a stake in Telecom Italia (TLIT.MI), but it lost out to Spanish rival Telefonica.
The firm afterward also looked at Serbian company Telekom Srbija and Poland's Polkomtel without submitting formal offers. Further afield, reports in February said that Slim was also eyeing Turkey as a possible new investment destination.
LONGER TERM GAME
As of the end of the first quarter, America Movil had cash and securities worth about $4.5 billion, giving it the resources to make good on its offer for the Dutch company. Nevertheless, KPN said it was being undervalued.
Investors took fright at the planned purchase, knocking more than 8 percent off the value of America Movil's shares.
Richard Dineen, a telecoms analyst at HSBC, said there was probably market disappointment because the move into "new frontiers" had dashed expectations America Movil might begin plowing cash into higher dividends rather than new expansion.
"Mr. Slim sees a lot of medium- and long-term value here, and we would agree with that, we think generally European telcos are undervalued," he said. "He is taking advantage of a fairly unusual kind of bearishness at the moment."
America Movil currently holds 4.8 percent of KPN, which is struggling to reverse a decline in revenue, profit and market share amid intense competition on its home turf.
Shares in the Dutch firm leaped by 17 percent after Slim's offer but at around 7.58 euros at the close, the price is way below what it was just over a year ago, when it topped 12 euros.
By contrast, America Movil's share price earlier this week closed at a record high.
The company, which had some 246 million mobile subscribers in the Americas at the end of March, already controls 70 percent of the mobile market in Mexico, and its scope for expansion in Latin America's second-biggest economy is limited.
Adding to Slim's motivation to seek new pastures has been increasing pressure from regulators over the past year.
KPN looked to be a good fit for the billionaire's fixed line and mobile businesses, said Enrique Melrose, a telecoms expert at Mexico's private ITAM university.
And economic uncertainty in Europe has presented Slim with the chance to create a bridgehead there, Melrose added.
Europe's debt crisis has flared up again in recent months and markets have wobbled at the prospect of fresh tension, brought on by electoral gains by politicians in France and Greece pushing back against German-led austerity measures.
America Movil Chief Financial Officer Carlos Garcia Moreno said it was too early to say whether the company would do other deals in Europe, but suggested KPN would help it to take a look.
"KPN is the target for our first investment ... We have a long-term investment horizon," he told reporters. "We've taken our time. This one seems to make a lot of sense.
One European telecoms industry analyst, who declined to be named, said America Movil's move appeared designed to thwart potential expansion by rival Telefonica in Germany, where KPN has been trying unsuccessfully for years to merge its E-Plus unit with Telefonica-owned (TEF.MC) O2 Germany.
Telefonica is Slim's biggest rival in Mexico, where it has about 22 percent of the mobile phone market.
America Movil was "definitely in a position to pick up bargains" the analyst said, pointing to struggling Irish telecom operator Eircom and Slim's former target Telecom Italia.
(Additional reporting by Michael O'Boyle and Cyntia Barrera; editing by M.D. Golan)