June 1, 2012 / 6:04 AM / 8 years ago

UPDATE 4-KPN may try to sell German unit to fend off Slim

* KPN says to review options for German unit E-Plus

* Shares trade at 7.70 euros, below Slim’s 8 euro offer price

By Gilbert Kreijger and Robert Hetz

AMSTERDAM/MADRID, June 1 (Reuters) - Dutch telecoms group KPN said it could sell its German unit, its largest and most profitable business, in a renewed attempt to persuade shareholders to reject a bid from Mexican tycoon Carlos Slim.

Slim’s America Movil has launched an offer of $3.25 billion, or 8 euros per share, for up to 28 percent of KPN, enough to have a major say in the company’s strategy but below the threshold that would oblige it to make an offer for the whole company.

KPN said on Friday it would review its options for the E-Plus German unit to create “superior value” for all its shareholders.

“As I have said, we are exploring all strategic options and we will take decisions in the best interests of our shareholders to maximise value,” Chief Executive Eelco Blok told a conference call.

Corne van Zeijl, a fund manager at SNS Asset Management, which owns about 0.5 percent of KPN, said a sale of E-Plus might deter America Movil, which raised its KPN holding on Thursday to 5.01 percent from 4.8 percent.

“This is one of KPN’s pearls. If you sell that, there is less remaining, making it less attractive for America Movil - although it would also be less attractive for other shareholders,” he said, adding that SNS had not yet decided what it would do with its stake.

KPN urged shareholders again on Friday to reject Slim’s offer, saying his intentions were unclear and that an acquisition of such a major stake might deprive them of a mergers and acquisitions premium.

“Imagine that in the strategic review there is substantial value that can be crystallised in Germany and that through negative control, and because of the majority they could vote against it, then simply we could not crystallise this value for all our shareholders,” Chief Financial Officer Eric Hageman told a conference call.

Pressed on whether KPN had held any talks with Spain’s Telefonica, the most obvious buyer for E-Plus as it owns Germany’s smallest mobile operator, Hageman said: “Let’s just be very clear, it depends on what other parties will do and we cannot talk on behalf of other people.

Shares in KPN, which is struggling in its home market and has cut costs to the bone, slid during the call and by 1331 GMT were trading up 0.6 percent at 7.69 euros, off a high of 7.80 - as analysts remained unconvinced about the company’s ability to generate more value.

“The main lever used by KPN to crystallise short-term upside in the share is an attempt to inspire hopes for consolidation in German mobile,” Jefferies telecoms analysts wrote in a note. “We remain sceptical.”

“The AMX offer ending 27 June (can be extended) is a certain premium now, while consolidation upside remains tentative, not least on regulatory hurdles.”

Germany’s telecoms regulator and cartel office both said they had not been notified of any plans for a merger, which would have to be approved by them, and KPN said management had not held any detailed discussions with German regulators.


Telefonica, America Movil’s arch-rival in Latin America, raised hopes on Thursday of consolidation in Germany by announcing a partial listing of its O2 Germany unit.

But the cash-strapped company denied on Friday that it would make a bid for KPN’s E-Plus, which analysts value at 8 to 10 billion euros ($9.9 to $12.4 billion), the bulk of KPN’s 10.9 billion-euro market value.

“We’re not going to bid for either part or all of KPN,” a Telefonica spokesman told Reuters.

KPN and Telefonica have held on-and-off talks for years about merging their German units, which are the two smallest players in Europe’s largest market, but have never agreed on price or on who would buy whom.

One hedge fund manager suggested that KPN and Telefonica could merge their German operations and list the business as a defence against Slim’s unwanted offer.

Analysts estimate potential synergies from a merger at around 4 billion euros.

But even that might not be sufficient, the hedge fund manager said, unless such a plan pushed KPN’s share price over the 8 euros Slim is offering - a level the shares have not reached since the bid was announced.

Kepler analyst Javier Borrachero said: “The risk is that KPN might be dead money for a while, in the absence of a strong operational turnaround, so from a pragmatic point of view I would tender my shares.”

Slim, the world’s richest man, has said little about his intentions for KPN, his first venture into Europe.

But he is unlikely to want to sell E-Plus, the jewel in KPN’s crown, which accounts for most of its customers and has the highest core profit margin in the group, at 42 percent.

Dutch newspaper Het Financieele Dagblad reported on Friday that KPN was actively looking for investors in China and the Middle East who want to own a substantial stake of the company, citing unnamed sources.

KPN’s Hageman told reporters KPN had spoken to investors in the United States, Europe and Asia, including China, but declined further comment. ($1 = 0.8088 euros) (Additional reporting by Robert-Jan Bartunek in Brussels, Victoria Howley in London and Nikola Rotscheroth in Duesseldorf; Writing by Georgina Prodhan; Editing by Erica Billingham and Will Waterman)

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