KPN to buy Getronics for $1 billion

By Niclas Mika

AMSTERDAM (Reuters) - Telecoms group KPN (KPN.AS: Quote, Profile, Research, Stock Buzz) has agreed to buy struggling information technology services company Getronics GTN.AS for 766 million euros ($1 billion), making it the Dutch market leader in IT services.

KPN KPN.N, which also beat analysts' expectations by posting flat second-quarter core earnings on Monday, said the cash takeover offer at 6.25 euros per Getronics share was part of its strategy to move from providing communications links to more value-added services in the business market.

The former Dutch telecoms monopoly will spend an additional 415 million euros to buy back Getronics' outstanding convertible bonds maturing in 2008, 2010 and 2014 as well as preference shares, Chief Financial Officer Marcel Smits said.

KPN shares fell 0.5 percent to 11.21 euros by 1329 GMT, while the DJ Stoxx telecoms index was down 0.4 percent. Getronics shares rose more than 20 percent to 6.15 euros.

KPN said several hundred jobs would be cut in the deal and it expected to generate annual synergies of 50 million euros from 2009. Getronics' tax losses that can be carried forward have a net present value to KPN of 100 million euros, it said.

Rabo Securities said KPN was paying an enterprise value of around 7.5 times Getronics' forecast 2007 core earnings, in line with the European sector. "One should bear in mind that Getronics has traditionally been trading at deep discounts to its peer group," the broker said.

KPN had been in exploratory talks with Getronics last year, but reached no deal at the time.

"There have been major changes at Getronics. They have divested a lot of assets that we think they should have divested," KPN Chief Executive Ad Scheepbouwer told journalists on a conference call.