* Slim's America Movil owns nearly 30 pct of KPN
* Says will back KPN's 4 billion euro fundraising
* Slim says will not raise stake beyond 30 pct
* KPN shares fall to 11-year low as takeover hopes fade
* America Movil takes 2 seats on KPN supervisory board
(Adds trader comments on America Movil, updates stake size,
By Robert-Jan Bartunek
BRUSSELS, Feb 20 Carlos Slim, the world's
richest man, has backed KPN's plan to raise 4 billion
euros ($5.3 billion) and will take two board seats as he battles
to turn around a losing investment in the Dutch
However, the Mexican telecoms tycoon, whose America Movil
owns just under 30 percent of KPN, said on Wednesday
he would not launch a full takeover as it struggles with
cut-throat competition and high investment costs. KPN shares
slid over 9 percent to an 11-year low.
"The 4 billion euros they (KPN) are looking for is about the
same size as their market capitalization. This confirms a highly
dilutive capital increase," said a trader in Brussels. "The
standstill agreement also removes takeover speculation."
The announcement was also a blow to America Movil shares,
since Latin America's biggest phone company will have to invest
a further 900 million euros in KPN to maintain its 29.77 percent
American Movil shares fell more than 2 percent to 14.14
pesos in Mexican trading.
America Movil has already pumped about 3 billion euros into
KPN, buying shares at mostly just below 8 euros as part of a
drive to expand in Europe. The Mexican group also has a stake in
Telekom Austria, which is underwater as well.
KPN shares have slumped - trading as low as 2.871 euros on
Wednesday - as it battles with a heavy debt load and stiff
competition and after paying much more than expected for a
fourth-generation mobile license.
KPN, which announced earlier this month it planned to raise
4 billion euros in equity capital, said it would seek 3 billion
euros via a rights issue. It will also offer hybrid securities.
A source close to the deal said KPN would need to sell about
2 billion euros of hybrids to hit its 4 billion euro target, as
they are usually recognised as 50 percent equity.
KPN plans to use the proceeds to cut net debt of about 12
billion euros, and to continue investing in its operations.
The accord will put to rest, at least for a spell, investor
concerns that America Movil would not support KPN as it seeks to
rebuild its balance sheet, and calm speculation about a
It may not calm rumors that America Movil and other
investors could one day push for broader management changes,
including the dismissal of embattled Chief Executive Eelco Blok.
Asked whether management changes had been discussed between
America Movil and KPN, a spokesman for the Dutch company
declined to comment, and said no changes to the board of
management were included in Wednesday's agreement.
An America Movil spokeswoman declined to comment on any
possible management changes.
It will take two seats on KPN's eight-member supervisory
board and the two companies will form joint working groups to
advise KPN's board on operational and financial matters, KPN
The Dutch group reiterated they could also cooperate in
areas such as joint procurement, international mobile roaming
and international transit with the aim of reducing costs.
"America Movil was keen to ensure it had more concrete
parameters for its relationship with KPN and to make sure it has
more direct information and insight into what is going on in the
company," the source close to the deal said. "It is a positive
signal that America Movil ... is standing behind the company."
KPN said the agreement did not have an expiration date, but
could be cancelled by either party with two months notice. KPN
agreed it would not do so in the first two years.
The idea was also put off that Slim would take over all of
KPN anytime soon. Credit analysts have long seen that as
unlikely, given America Movil leverage levels.
"Consolidating the whole company and putting all that on its
balance sheet at this stage would not be viewed favourably by
America Movil shareholders," the source said.
America Movil, Latin America's biggest phone company,
earlier this month reported weak fourth-quarter results that
widely missed analysts' expectations, in part because of
exchange losses related to its stakes in KPN and Telecom
The new capital raise by KPN is adding to downward pressure
on America Movil's shares, analysts said. The shares have lost
more than 4 percent year to date.
The new investment "is a large chunk of money," said Jorge
Nevid, head trader at brokerage Accival in Mexico City. "After
fourth-quarter results that were not in line with expectations,
now the announcement they're putting more money into this
company - something is not going well here."
Theodoor Gilissen analyst Jos Versteeg said Slim, whose net
worth is estimated at $72 billion by Forbes magazine, might
still end up taking over KPN in the longer term.
"What Slim has done in Latin America is take a stake, invest
heavily and then take over the group completely," he noted.
America Movil already has de-facto control of KPN because of
a traditionally low turnout at KPN shareholder meetings.
KPN said Deutsche Bank, Goldman Sachs and
JP Morgan would underwrite the rights issue.
Companies generally have to pay higher interest rates on
hybrid bonds, but credit rating agencies treat them as partially
helping to improve debt ratios.
KPN shareholders will vote on the fundraising and on
appointing the new board members on April 10. The rights issue
is expected to be completed by mid-May, the source said, while
the hybrid offering could be done at any time.
($1 = 0.7487 euros)
(Additional reporting by Philip Blenkinsop in Brussels, Leila
Abboud in Paris, Kylie MacLellan in London, Elinor Comlay and
Lorena Segura in Mexico City; Editing by Mark Potter, Kenneth
Barry and Jeffrey Benkoe)