Slim puts Telefónica’s purchase of KPN’s German unit at risk

The Mexican telecoms giant América Móvil, the biggest operator in Latin America, could scupper Telefónica’s recently agreed deal to acquire Royal KPN’s German unit E-Plus for 8.1 billion euros in shares and cash.

América Móvil is KPN’s biggest shareholder with a stake of close to 30 percent. There was an agreement in place under which the Mexican group, controlled by magnate Carlos Slim, undertook not to increase its holding to over 30 percent, a move that under Dutch regulations would oblige it to launch a full takeover bid for the company. However, KPN said Monday that América Móvil had terminated that agreement with immediate effect, thereby allowing it to increase its stake to over 30 percent.

América Móvil has two representatives on the board of directors of KPN who have expressed their disapproval of the agreement with Telefónica on the sale of E-Plus, which is subject to approval in an extraordinary meeting of the Dutch company’s shareholders. In the event of shareholders rejecting the deal, KPN would have to pay Telefónica compensation of 50 million euros.

However, sources close to KPN said Monday they were unaware of any possible changes in the shareholder structure of the company. “The Mexican company has not made it known if it is interested in increasing its stake,” one source said. KPN has a market capitalization of around 8.5 billion. That stake in the company América Móvil does not control is worth around 6 billion euros.

Slim, the second richest man in the world according to Bloomberg, has used KPN as a springboard for América Móvil’s foray into the European telecommunications market. However, without E-Plus, the third-largest cellphone operator in Germany, onboard Slim’s investment in KPN loses some of its attraction.

Slim has used KPN as a springboard for América Móvil’s foray into the European telecommunications market.

Although the deal with Telefónica has been welcomed by KPN’s shareholders in the market, that is little consolation for Slim, who bought the bulk of his stake in the Dutch operator in 2012 for a sum well above the current market price. Telefónica is also one of América Móvil’s main rivals in Latin America.

Under the shareholders’ pact with KPN signed in February of this year, América Móvil agreed to participate in a capital increase by KPN of 3 billion euros if it was guaranteed two seats on its board of directors. The accord guaranteed that, provided América Móvil maintained a stake of at least 20 percent in KPN but less than 30 percent.

The acquisition of E-Plus by Telefónica German unit Telefónica Deutschland would make the Spanish operator the largest cellphone company in Germany — ahead of T-Mobile and Vodafone — with 43 million clients. The combined revenues of Telefónica and E-Plus would amount to around 8.6 billion euros a year. Telefónica also expects synergies from the acquisition of between 5 and 5.5 billion euros net of merger costs.