Carlos Slim threatens to walk away from KPN bid

Aug 30, 2013, 5:44 AM EDT

AMSTERDAM (AP) — Carlos Slim threatened Friday to walk away from his €7.2 billion ($9.5 billion) offer to buy the 70 percent of Dutch telecom Royal KPN NV he doesn't already own after a foundation linked to the company mounted a "poison pill" defense.

The KPN Foundation is a body peculiar to the Netherlands formed to defend the rights of not only shareholders, but also workers and customers. Late Thursday it said it viewed Slim's bid of 2.4 euros per share as hostile and exercised its right to issue temporary preference shares worth 49.9 percent of voting rights in KPN — effectively blocking Slim's bid.

On Friday, the Mexican billionaire's company, America Movil responded in a statement that its plans will benefit KPN and it could withdraw its bid if the foundation persists.

If 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.

KPN shares fell 5.6 percent to 2.16 euros in early Amsterdam trading.

The Foundation, which has 5 directors and acts independently, said the main reason for its move is that Mobil hasn't yet published details of its offer, and therefore it is impossible to know how stakeholders may be affected — though in its press releases, Movil has said it plans to invest in KPN and maintain its brand.

"The Foundation believes that América Móvil should, in accordance with... what is common practice in the Netherlands, open negotiations with KPN's Board of Management and the Dutch government as soon as possible."

It is not clear what role, if any, the government should have in the matter.

KPN spokesman Stefan Simons said KPN's boards "are in contact" with Movil "and we would like to continue that."

Slim's offer for KPN could be seen as opportunistic, as shares were well under 2 euros each as recently as June, but it could also be seen as sympathetic. He built his 30 percent stake over the past two years, buying when shares were still worth 8 euros each.

Although the latest developments leave the KPN takeover in limbo, they won't affect another important deal: KPN's proposed sale of its German E-Plus unit to Telefonica SA of Spain for $11.4 billion in cash and shares. Telefonica plans to merge E-Plus with its own German arm.

Earlier this week, Movil gave its "irrevocable commitment" to the E-Plus sale. The Foundation said Thursday it also endorses selling the German deal, so it is virtually certain to be approved at a KPN shareholders' meeting Oct. 2.

Under current management, KPN has been foundering. It ran into financial trouble as increasing use of smartphones began eating into margins in the Netherlands, where it is the dominant carrier. Customers with smartphones decided to ditch KPN's highly priced SMS text messaging service masse for cheaper Internet-based services, and KPN's profits plunged.

Then KPN paid more than it had expected to the Dutch government in an auction for fourth generation mobile licenses, loading its balance sheet with debt.

In May, the company was forced to issue 3 billion euros worth of new shares — an offering that Movil helped underwrite. Even after the share issue, KPN carries 9.5 billion euros in net debt at the end of the second quarter.

It recorded a second-quarter net profit of 107 million euros on sales of 2.94 billion euros.