Telefónica purchase of E-Plus to proceed after new deal with América Móvil

Telefónica has reached an agreement with Mexican magnate Carlos Slim’s América Móvil that will allow the Spanish telecoms giant to proceed with its planned purchase of KPN’s German unit E-Plus, albeit at a higher price than initially accorded.

Telefónica originally agreed with KPN in July to buy E-Plus for a cash and share deal worth 8.1 billion euros. However, subsequent to that agreement, América Móvil unveiled a full takeover bid for KPN that left the E-Plus deal up in the air. Telefónica is América Móvil’s main rival in the Latin American telecoms market.

Under the renegotiated deal, Telefónica is now offering 8.550 billion euros for E-Plus. The size of the stake Telefónica will cede in its Telefónica Deutschland unit to KPN has been increased from 17.6 percent to 20.5 percent. KPN will also receive the 5.0 billion euros in cash that was originally agreed.

The transaction also grants a call option to Telefónica to acquire a 2.9-percent stake in Telefónica Deutschland from KPN, only exercisable one year after completion of the deal. The option can be exercised for all or part of the stake. The exercise price for the entire stake amounts to 510 million euros plus accrued interest at 2.27 percent from the time of completion of the sale of E-Plus and reduced for any dividend payments received.

América Móvil has made an irrevocable commitment to vote in favor of the proposed transaction at KPN’s extraordinary general meeting to be held on October 2. KPN urged all of its shareholders to accept the deal. América Móvil’s current stake in KPN is 29.7 percent. It is offering 2.40 euros per share for the 70.3 percent it does not already own in an operation expected to be launched next month.

The acquisition of E-Plus will make Telefónica the market leader in the German cellphone market, with a client base of 43 million and annual revenues of 8.6 billion euros.