KPN foundation intervenes to block America Movil offer for KPN

AMSTERDAM/MEXICO CITY Thu Aug 29, 2013 7:06pm EDT

AMSTERDAM/MEXICO CITY (Reuters) - An independent foundation linked to KPN (KPN.AS) said on Thursday it had moved to block America Movil's (AMXL.MX) proposed 7.2 billion-euro offer for the Dutch telecoms group to protect the interests of stakeholders.

The move could test billionaire Carlos Slim's resolve to acquire European assets to offset a slowdown in core profit at his flagship company America Movil, a person familiar with the sector said.

The KPN foundation - set up to protect key national infrastructure when the former state-owned monopoly was being privatized - said it had exercised an option to buy certain shares that will give it almost 50 percent of KPN's voting stock.

"The foundation has intervened in this way in order to safeguard the interests of KPN and its stakeholders, including shareholders, employees, customers, trade unions and Dutch society more generally," it said, adding that these interests were at risk because America Movil had not consulted with KPN before announcing its intention to make a takeover offer.

America Movil, which holds close to 30 percent of KPN and earlier this month said it intended to bid for the rest of the company, could challenge the move in court.

"We wouldn't be surprised to see AMX go to (the European Union) to challenge the authority and legality of the foundation on the back of this move," said Imari Love, analyst at Morningstar. "It's clear the foundation is trying to keep KPN Dutch-owned by using this poison pill, which, in effect, has the same impact of golden shares, which are illegal."

It is also possible that America Movil could negotiate and offer a higher price for the 70 percent of KPN it does not already own.

"The foundation believes that America Movil should, in accordance with the rules and what is common practice in the Netherlands, open negotiations with KPN's Board of Management and the Dutch government as soon as possible," the foundation said in its statement.

TACTICS

America Movil made its offer for the rest of KPN to squeeze more money from Telefonica (TEF.MC), which is seeking to buy KPN's E-Plus Germany unit, some analysts have said.

Earlier this week, Telefonica raised its offer by 6 percent to 8.55 billion euros, and it won America Movil's support for the deal.

The E-Plus sale will provide cash that will improve KPN's balance sheet, and although it leaves the company without direct exposure to Europe's biggest mobile market, it makes America Movil's 2.40 euro a share offer less attractive, analysts said.

In a research note written before the KPN foundation's announcement, analysts at Sanford Bernstein said, "We think that KPN could be worth as much as 3 euros per share."

But raising the offer price would be out of character for billionaire Slim, who has accumulated a business empire stretching from retail and financial services companies to infrastructure and oil and gas drilling companies by buying undervalued companies.

Foundations, such as KPN's, have been used as a tactic in high-profile corporate battles including LVMH's (LVMH.PA) failed hostile takeover of Gucci in 1999 and hedge funds' efforts to replace the board and break up chip equipment maker ASM International (ASMI.AS) in 2008.

Shares of America Movil, which bought nearly 30 percent of KPN last year, initially rose on the announcement, reflecting the unpopularity of the KPN investment. The purchase has so far resulted in billions of pesos in paper losses for America Movil, Slim's flagship company.

Shares of Slim's company ended down 0.16 percent at 12.81 pesos in trading in Mexico. KPN's shares closed down 0.65 percent at 2.28 euros on Thursday, before the foundation's announcement.

A spokeswoman for America Movil declined to comment.

"The fear now will be that Slim will now try to exit - any sign that he will throw in the towel and sell down his stake will hang over the KPN shares," said the person familiar with the sector.

(Reporting by Sara Webb, additional reporting by Robert-Jan Bartunek in Brussels, Leila Abboud in Paris, Elinor Comlay and Tomas Sarmiento in Mexico City; Editing by Tom Pfeiffer, Steve Orlofsky and Carol Bishopric)