By Sara Webb
AMSTERDAM, June 20 Dutch telecom KPN's
attempt to sell its German unit E-Plus to Spain's Telefonica
- a move intended to ward off an unsolicited approach
by Carlos Slim - has fallen through, just days before the
Mexican tycoon's tender offer closes.
KPN's failure to find a buyer or merger partner for E-Plus,
which some analysts had valued at between 8 billion and 10
billion euros, now leaves the Dutch telecoms operator with few
other options to keep the Mexican billionaire at bay.
Slim's mobile phone giant America Movil has little
left to snap up in Latin America and has turned its sights on
Europe in search of undervalued assets.
In recent weeks, it has launched a tender offer to buy up to
28 percent of struggling KPN, a move that could cost as much as
$3.25 billion. On Wednesday, America Movil said it has increased
its stake in KPN to 8.7 percent.
It has also agreed to buy a 21 percent stake in Telekom
Austria for about $1.1 billion.
KPN is due to respond on Thursday to America Movil's tender
offer, which closes on June 27, but the Dutch telecom has
already said the offer price of 8 euros per share undervalues
KPN's shares closed at 7.9 euros on Wednesday, down 0.55
The Dutch firm faces tough competition in its home market
and has been looking at divesting its German and Belgian
Slim, the world's richest man, has said little about his
intentions for KPN, his first venture into Europe.
But he is unlikely to want to sell E-Plus, the jewel in
KPN's crown that accounts for most of KPN's customers, and has
the highest core profit margin in the group, at 42 percent.
However, KPN's efforts to "unlock value" in E-Plus in order
to fend off the Mexican group have so far failed, and on
Wednesday, it said that talks with parties - which it did not
name - had broken off.
"The current adverse conditions in financial markets have
meant that no agreement could be reached at this point in time,
and talks have been terminated," KPN said in a statement.
KPN, which has a stock market capitalization of 11.3 billion
euros, added that it believes other parties recognize the
"significant value" in the large German market where
consolidation is expected.
Spain's Telefonica had been seen as a possible white knight
for E-Plus, even though it is strapped for funds and has a heavy
One possibility would have been to merge E-Plus with
Telefonica's O2 Germany, people familiar with the matter had
told Reuters, followed by a partial listing of the new company.
But earlier on Wednesday, a source told Reuters that
Telefonica had no plans to interfere.
America Movil had no immediate comment.
With just a few days left before the tender offer closes,
KPN could still use a tactic that's common in the Dutch
corporate world, unleashing a risky "poison pill" defense to
derail America Movil's approach.
But such a move - handing preference stock to KPN's
"Stichting" or foundation that could outvote other shareholders
- is fraught with uncertainty and could backfire through legal
challenges by America Movil or KPN's own shareholders.
Robin Bienenstock, analyst at Bernstein Research, said KPN's
statement read like an appeal to the foundation to take action.
"The reality is that Mr Slim's bid is opportunistic and
finds KPN in a moment in which defense by a sale of assets to
Telefonica is nigh on impossible. We think that there is a
common sense argument for the foundation to give KPN's
management a stay of execution, and enact their shares
temporarily. But it will at this point be up to their lawyers
and KPN to persuade or dissuade them of it."
She added, "We think that Telefonica could afford this deal
were it to sell certain assets, and they are motivated to do so.
But with so much focus on Spain, and its creaking banking
system, it is hard to see how they could possibly justify a deal
today. In addition, an extension of time by any action of the
foundation would have to give Telefonica enough time that they
could sell some of those assets in an orderly fashion and (with
luck) find a happier Spanish window onto the debt markets."