Carlos Slim: gearing up for a Mexican standoff with KPN?
A Mexican standoff? América Móvil (AMX), the Latin American telecoms giant, has ditched a shareholder pact with KPN. What happens next?
As the FT has reported, the ending of an uneasy truce between the shareholders – which had limited AMX’s stake in the Dutch telecoms group – opens the door to several possibilities, especially since AMX’s boss, Carlos Slim, is believed to be none too keen on the price at which KPN was planning to sell its German business.
With a stake of nearly 30 per cent in KPN, the Mexicans could potentially throw a big spanner in the works when that proposed deal goes to shareholders at an extraordinary meeting (a date for that has not been set). KPN would need to rally a turnout of nearly 60 per cent and get all non-AMX shareholders to back the sale. That looks like being quite a big if – considering, as one analyst noted, KPN’s average attendance at EGMs over the past decade has been more like in the 40s per cent.
Stymie the German sale, then, and bid for all of KPN? That would be costly. As Bloomberg reported:
To buy KPN outright, America Movil would need to cancel a share buyback and obtain $4 billion of debt financing, Sanford C. Bernstein & Co. analysts said in a note last week. It could also partner with AT&T Inc. for a bid, they said.
Buying KPN would mean swallowing $12bn debt – something that could put AMX’s cherished A2 Moody’s and A- Standard & Poor’s ratings at risk. The Mexicans would want to avoid any “Dutch act” here – an expression that means suicide.
How about teaming up with AT&T then for a bid? AT&T is AMX’s second-biggest shareholder and the two companies have a relationship stretching back more than two decades. And AT&T has been looking to boost its European presence – unsuccessfully sounding out Spain’s Telefónica about buying a nearly 30-per cent stake, for instance.
It certainly seems to harbour European ambitions. As Bloomberg noted last month:
The second-largest U.S. mobile operator informally approached Spanish authorities to discuss its interest in buying as much as 29.9 percent of Telefonica, and was told such a proposal wouldn’t be welcome, said one of the people, who asked not to be identified as they weren’t authorized to speak publicly. AT&T has also evaluated scenarios that include buying assets such as Telefonica’s U.K. unit O2 or Latin American businesses, two of the people said.
Could their combined firepower be a way of rescuing the $4bn Slim has sunk into KPN, which is looking increasingly like a poor bet given KPN’s current prices?
Alternatively, what about letting the German sale go ahead, but letting the threat of voting against it hang in the air as an incentive to improve the price? Another possibility. Maybe even as a prelude to a bid for KPN at a later date?
AMX is staying mum for now. But its stock has shed more than 11 per cent so far this year. Plenty to ponder, then.
(FT)