(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Quentin Webb
LONDON, Sept 11 (Reuters Breakingviews) - Carlos Slim can
pay more for KPN (KPN.AS). Unless the two sides agree a friendly
deal, a poison pill will probably stop the billionaire’s America
Movil (AMXL.MX) from buying the 70.2 percent of the Dutch
telecoms outfit that it does not already own. Yet there are
strategic and financial reasons for Slim to keep the deal alive.
And since his current offer looks cheap, a sweetened bid could
still stack up.
At 2.40 euros a share, Slim’s proposal is worth at most 7.2
billion euros. It represents a skinny 20 percent premium over
KPN’s value prior to the offer being announced, and equates to
an enterprise value of about 4.6 times 2014 EBITDA,
Breakingviews calculations show.
That looks meagre. Without any takeover premium, European
peers trade on about 4.8 times forward EV/EBITDA ratios,
according to Datastream. Worse, the offer is unchanged since
KPN, at America Movil’s prodding, won better terms for the sale
of its German unit. That added roughly 11 cents per share to
So, there should be room for manoeuvre – even if America
Movil is insisting it will not budge. A bid at 2.70 euros a
share would lift the premium to 35 percent, and the EBITDA
multiple to about 5 times, without blitzing America Movil’s
What’s more, if the regulatory, technological and economic
challenges hammering European telecoms abate, valuation
multiples and earnings should recover across the sector. And
while there won’t be big synergies, America Movil presumably
reckons it can run KPN better than the current lot, unlocking
A successful deal has wider significance for Slim too. He
has already staked 4 billion euros on KPN, but gained limited
influence in return, as the German kerfuffle showed. He is also
eager to diversify away from Mexico, where the government is
taking on oligopolies. Doubling down both deepens his European
presence and protects an important existing investment.
These broader strategic considerations are harder to value.
But suppose they are worth 500 million euros to Slim. That could
justify a further bump towards 2.85 euros a share. If Slim
really is serious about his proposal, he can afford to show it.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- America Movil, the Latin American telecoms group
controlled by Mexican billionaire Carlos Slim, has no intention
of raising its bid for Dutch telecoms group KPN, a spokesman
told Reuters on Aug. 30. Arturo Elias, Slim’s chief spokesman,
said there was “no way” America Movil would pay more.
- Reuters: America Movil says has no intention of raising
KPN offer [ID:nL2N0GV1BS]
- For previous columns by the author, Reuters customers can
click on [WEBB/]
(Editing by Chris Hughes and Sarah Bailey)
Keywords: BREAKINGVIEWS SLIM/KPN/
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