London - America Movil SAB said it is prepared to drop a 7.2-billion-euro ($9.5-billion) bid for Royal KPN NV after the Dutch carrier’s foundation used an option to buy shares to impede what it described as a hostile takeover.
KPN’s foundation said on Thursday it exercised the option to acquire preferred shares, giving it almost 50 percent of issued and voting stock, almost enough to entirely block America Movil’s 2.40 euro-per-share offer for majority control. KPN fell 5.5 percent to 2.16 euros at 10.13am in Amsterdam. America Movil holds about 30 percent of KPN.
“In the event that the foundation maintains its current position and seeks to prevent the offer from proceeding to the detriment of KPN’s customers, employees and shareholders, and also to the detriment of telecommunication services in the Netherlands, all of whom America Movil firmly believes will benefit from the offer, America Movil is prepared to withdraw its offer,” the Mexico City-based company said today in a statement.
The foundation, scheduled to host a press briefing at 11am in Amsterdam, said it will only hold the shares temporarily, leaving the door open for America Movil to address its concerns. The wireless company controlled by billionaire Carlos Slim is seeking to boost its stake in KPN to more than 50 percent.
“We want clarity and structure,” said Walter Samuels, a foundation spokesman. “We need an orderly process which will lead to a merger protocol, an offer document and just follow the procedures.”
In its statement, America Movil said its August 9 announcement of its bid intention followed consultations with KPN and is “contrary to what has been stated by the foundation.” America Movil had “substantive discussions” with KPN as recently as this week and “further meetings were scheduled to take place today,” it said.
America Movil is using KPN as a way to enter the European market, expanding beyond the western hemisphere. The carrier also holds a stake of about 24 percent in Telekom Austria AG.
“Negotiations for AMX are getting tougher,” Gregorio Tomassi, an analyst at Banco Itau BBA in Mexico City, said on Thursday in a research note, referring to America Movil’s ticker symbol. “The KPN foundation is forcing AMX to sit and negotiate on demands that are not yet clear.”
The foundation may be aiming to firm up conditions such as employee compensation, bonus packages and management continuity before agreeing to let the offer proceed, said Tomassi.
Shares of America Movil fell less than 1 percent to 12.81 pesos on Thursday in Mexico City.
The foundation’s move came just after America Movil appeared to be addressing the group’s concerns. Slim’s company agreed this week to endorse the sale of KPN’s German unit to the billionaire’s biggest Latin American rival, Telefonica SA - even convincing the Spanish company to sweeten its bid for the asset. After negotiating with America Movil, Telefonica increased the value of the bid for the KPN unit to 8.55 billion euros from 8.1 billion euros.
America Movil committed to vote in favour of the German deal after the foundation urged the company to make clear its position on the transaction. Now the foundation is asking America Movil to file documents that clarify how it calculated its offer. It also seeks information on commitments America Movil is making on technology, employment, strategy and governance, it said.
“The foundation believes that America Movil has knowingly opted for a hostile approach by not first trying to reach agreement on a merger protocol with KPN,” the group said in a statement. America Movil also submitted an offer document to the Netherlands Authority for the Financial Markets without consulting with KPN, the foundation said.
The foundation said it continues to support the German transaction, leaving Telefonica’s deal assured.
Slim’s company is also contending with opposition from KPN’s works council, which asked Dutch lawmakers to help block the takeover. KPN’s unions want a guarantee that KPN’s strategy will be continued and solid assurances from America Movil for the future of KPN’s employees, according to Joost van Herpen, a delegate for the Abvakabo union.
The foundation is in charge of defending the interests of KPN’s shareholders, employees and customers, as well as Dutch society. It has existed since the Dutch government first sold shares in KPN in 1994. On its board are Chairman Jacques Schraven, Vice Chairman Pieter Bouw, Hans Zwarts, Jan Klaassen and Peter Wakkie.
The group’s call option allows it to obtain the KPN shares for at least 25 percent of their nominal value, which is 0.24 euro a share, according to the foundation’s website. The foundation didn’t say how much it paid to acquire the 4.26 billion shares it obtained. The group has a financing arrangement with Dutch banks to fund the share acquisition. - Bloomberg