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Have the wheels come off America Movil's KPN takeover bid?

The Mexican telco's proposed acquisition of KPN has disintegrated thanks to a surprise move by the Dutch company's independent foundation.
Written by Martin Gijzemijter, Contributor

The independent foundation behind KPN has made a move to take control of the company, in what appears to be a successful attempt to block efforts by Mexican telco America Movil to take over the Dutch telco.

America Movil, owned by telecoms mogul Carlos Slim, announced plans last month to acquire the 70 percent of KPN it doesn't already own for €7.2bn. The bid was immediately followed by expressions of concern from KPN's foundation, Stichting Preferenteaandelen KPN B, whose sole purpose is to protect the company in case of an imminent hostile takeover.

In order to derail the bid, Stichting Preferenteaandelen KPN B exercised its right to issue itself 4.3 billion special shares in KPN late last week, which not only gives the foundation just over 50 percent of the company and control of voting rights, but also effectively halves America Movil's own stake in the company.

The foundation said it will spend €252m on acquiring the share, which it has taken out a loan to pay for. Interest on the loan will be paid through dividends received on the newly-acquired shares.

The move, announced late last week, was somewhat unexpected, as the foundation had previously threatened to acquire protective control over the company to prevent America Movil from blocking the sale of KPN's German division, E-Plus, to Spanish telco Telefonica.

Initially, America Movil had been planning to prevent the sale, but after Telefonica subsequently raised its offer by six percent to €8.55bn, America Movil voted in favour of the deal at a shareholders meeting last week.

Regardless of America Movil's approval for the E-Plus sell-off, Stichting Preferenteaandelen KPN B chose to initiate the rescue plan after all, stating that: "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 and by drafting an offer document and submitting it for approval to the Netherlands Authority for the Financial Markets (AFM) without consulting KPN."


In response to Stichting Preferenteaandelen KPN B's protective measures, America Movil has issued a statement threatening to withdraw its offer.

"America Movil is a company that continues to grow, serving more customers and investing more in the development of new services. This is what we aim to do with 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," it said.

Although the foundation's manoeuvring has proven effective for now, the threat of a KPN takeover has not entirely subsided.

Due to the release of the additional shares, KPN's share price has been suddenly significantly diluted. While the foundation has promised it's only temporary, it could enable America Movil to start buying substantial amounts of shares, without surpassing the critical 30 percent limit — the level of ownership it had previously agreed not to exceed. Whether the Mexican telco has plans to do so, it has yet to disclose.

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