BRUSSELS Dutch telecoms company KPN (KPN.AS) is in talks with Mexico's America Movil (AMXL.MX) over the latter's 7.2 billion-euro ($9.6 billion) takeover offer, the two sides said on Thursday, although both cautioned the outcome was unclear.
The deal is testing billionaire Carlos Slim's year-old effort to expand outside of Latin America, where growth opportunities are limited, after KPN's foundation two weeks ago moved to block the offer Slim's company made in early August.
The announcement of the talks was seen as positive for KPN shares but America Movil shares fell more than 1 percent on Thursday.
"This deal carries high execution risk (for America Movil)," said Julio Zetina, analyst with Vector Casa de Bolsa in Mexico City, who added it is significant that the talks are between KPN and America Movil and not the foundation and America Movil.
America Movil investors are concerned that the size of the deal might squeeze the company's finances as it is already committed to a hefty investment plan. The deal is also perceived as risky because Slim's flagship company has little experience in Europe, where companies face tough competition and strict regulation.
"The more it looks like the deal is going ahead, the worse it is for the share price," Zetina said.
America Movil shares were down 1.4 percent at 13.10 pesos in late-morning trading in Mexico. The company's U.S.-listed shares (AMX.N) were down 1.6 percent at $20.00.
In contrast, KPN's shares traded up 2.3 percent at 2.29 euros, below Slim's offer price of 2.40 euros. The STOXX 600 Europe telecoms sector index .SXTP was down 0.47 percent.
KPN said in a statement its management and supervisory boards were discussing with America Movil the price and conditions of the Mexican group's bid.
America Movil said in a separate statement it was committed to its planned offer for the shares in KPN it does not already own. It also said it could yet withdraw it.
ING analyst Emmanuel Carlier described the talks as a step in the right direction, while Nomura's Frederic Boulan said the talks showed there was still commitment to do a deal.
"We are not there yet, but I think that in the end, if KPN is happy to recommend the deal with a slightly better offer price, America Movil might be willing to make an effort," he said.
KPN said its boards were obliged to conduct talks after the unsolicited bid.
Jos Streppel, supervisory board chairman, said KPN was carefully considering the interests of shareholders, employees, customers and other stakeholders, on financial and nonfinancial matters, including the role of KPN as a public service provider.
"We understand there are many questions about the intended offer. We believe, however, it is important to conduct these discussions in confidence, and expect to provide more clarity at a later stage," Streppel said.
America Movil has not yet published a formal offer document.
The company was prompted to make its offer after KPN said in late July it was selling its German mobile unit E-Plus to Spain's Telefonica (TEF.MC), a rival of America Movil in Latin America.
Following America Movil's offer for the rest of KPN, Telefonica subsequently raised its bid for E-Plus, winning America Movil's support.
America Movil owned nearly 30 percent of KPN until a KPN foundation exercised an option to give itself about 50 percent of voting stock at the end of last month, chopping America Movil's share of the company in half. The foundation, set up when the former Dutch state monopoly was privatized, called on management to negotiate with Slim's company.
America Movil has said since that it has no intention of raising its bid.
In its statement on Thursday, the company said that even if it proceeds with an offer, it would not be an unconditional bid if the foundation retains its "ability to hold, acquire or vote preference shares B".
($1 = 0.7518 euro)
(Additional reporting by Elinor Comlay in Mexico City; editing by Greg Mahlich and Matthew Lewis)