AMX Attempts Cheap European Entry

America Movil (AMX) has offered EUR2.64bn ($3.44bn) to bring its stake in Dutch telecom KPN to as much as 28%, it says, seizing a cheap opportunity to expand in Europe and to better position itself against Telefonica. The Carlos Slim-controlled telecom holds a 4.8% stake in KPN, and is offering EUR8.00 per share to buy up to an additional 23.2%, representing a 24% premium to the previous day’s closing price, it says. KPN shares closed at EUR7.58 Tuesday, up more than 17%. “It’s an attractive offer [for AMX], as it presents a discount,” Valeria Roma, analyst at Monex, tells LatinFinance. She says the offer implies a 5.06x EV/Ebitda multiple, which is a 15% discount, and comes versus a European sector average of about 6.3x. “From a strategic standpoint, it’s an investment in a telecom with a strong profile in the countries that have among the most solid economies in the Eurozone,” she adds. It is not AMX’s first attempt to enter Europe, and is seen as offering the company a launching pad for additional growth in the continent as well as a means to check rival Telefonica. “AMX is almost certainly not just looking at the macro-economic angle, but at what it might extract from Telefonica in exchange for the German assets,” Robin Bienenstock, senior analyst at Bernstein, tells LatinFinance. She notes KPN’s falling Ebitda – to EUR5.1bn in 2011 from EUR5.5bn in 2010 – and that there is particular value in the German operations. Telefonica would be an obvious purchaser for the German assets if they were to be sold, as the German telecoms face domestic ownership caps. Were AMX to end up the full owner of KPN, it may find itself surprised at the difficulty of creating value in that asset, she adds. America Movil says it is not interested in total control of KPN, and that it supports the strategic plans of KPN’s management and its shareholders. AMX would pay cash, and expects to get approval from the local securities regulator and carry out the offer by the beginning of June. I