Timing key as Slim's Telekom Austria offer closes

Thu Jul 10, 2014 6:26am EDT

* Share price hovering just below 7.15 euro offer

* No higher offers expected

* Writedown cast shadow over Telekom Austria prospects

By Angelika Gruber and Georgina Prodhan

VIENNA, July 10 (Reuters) - America Movil's move to boost its stake in Telekom Austria could be the best chance shareholders will have to extract value from the stock for some time, investors and analysts said ahead of Thursday's offer deadline.

A surprise 400 million euro ($546 million) writedown on Telekom Austria's Bulgarian business last month has cast a shadow over the company's short-term prospects, enhancing the merits of the 7.15 euro-per-share offer from the Mexican group controlled by billionaire Carlos Slim.

America Movil is offering up to $2 billion for the 45 percent of Telekom Austria not already owned by the Mexican company and the Austrian state, which have combined their stakes in a shareholder pact.

Telekom Austria shares have hovered just below 7.15 euros since Slim made his offer, which closes at 1500 GMT on Thursday, and there appears to be little chance of a subsequent higher offer to squeeze out minority shareholders in the medium term.

"Before the writedown, I said I, personally, would hold my shares, because I saw prospects for the company in the medium to long term. But now I'm thinking what to do," said Wilhelm Rasinger, president of Austrian retail investor association IVA.

"Since a squeeze-out is neither foreseen nor possible, I don't know where I could get a better price. I'm leaning towards tendering," added Rasinger, emphasising that he was speaking about his own intentions and not making a recommendation.

The offer, designed to cement the presence in Europe of Slim's Latin American telecoms group, was launched in mid-May and represented a 10.7 percent premium over the six-month average share price.

DIVIDEND FREEZE

America Movil owns about 27 percent of Telekom Austria - which it effectively controls through the pact with the Austrian government, which owns 28 percent - and has a medium-term target of a stake of about 51 percent.

Take-up for the offer could also be boosted by Telekom Austria's dividend policy. The company announced in February that it will freeze its payout, which it cut to 5 cents per share in 2012, for a third year running.

About 10 percent of Telekom Austria's shareholders are retail investors, some of them Austrian citizens still holding shares they bought at 9 euros in the company's initial part-privatisation in 2000.

Guenther Schmitt, a Raiffeisen fund manager who holds Telekom Austria shares, said he planned to sell his shares to hedge funds in the market - thereby ensuring quick payment - and that the funds would then tender the stock to benefit from the slight premium in the offer.

Erste Group's chief analyst Guenther Artner is another to have recommended the America Movil offer.

"I think the best strategy is to take up the offer," he said, pointing out that investors may have an opportunity to buy back in to the company in a capital increase expected by mid-2015.

A note from Jefferies analysts after the offer was launched described the price as "reasonable", adding that "a meaningful level of acceptances should be expected".

Results of the tender are expected early next week, though Austrian takeover law requires that investors are given the opportunity to sell at the same price in another three-month window shortly after the initial offer process is concluded. ($1 = 0.7331 Euros) (Editing by David Goodman)