Billionaire Carlos Slim's América Móvil will support Spanish telecom giant Telefonica's bid to acquire Dutch carrier Royal KPN's German business unit E-Plus, as Telefonica has revised its offer terms considerably.
América Móvil, the largest shareholder in KPN with a 30% stake, was not favouring Telefónica's initial cash and stock offer for E-Plus. The company said the price undervalues the German business.
Instead, América Móvil offered to fully acquire KPN for about €7.2bn ($9.6bn, £6.2bn) or €2.40 per share. The offer price for the remaining 70% stake in KPN was a 20% premium to share price that time.
Telefonica said in a statement that América Móvil will vote in favour of the E-Plus deal at an extraordinary general meeting to be held by KPN on 2 October. KPN has already recommended that its shareholders vote in favour of the deal.
Telefónica intends to merge E-Plus into its German subsidiary Telefónica Deutschland. As per the revised terms, KPN will own a 20.5% stake in Telefónica Deutschland, up from the initially-planned 17.6% stake. It will still get €5bn in cash.
Meanwhile, Telefónica's stake in Telefónica Deutschland will be reduced to 62.1% from 65%, and the remaining stake will be free float. Telefónica will also have the option to acquire an additional stake of up to 2.9% of Telefónica Deutschland to reach a final 65% stake in the company.
Telefónica noted that the deal has helped it to come closer to the objectives announced at the end of July in reference to becoming Europe's second largest operator.
"The transaction will result in a new strong player in the German mobile market with 43 million mobile customers and combined pro forma revenues of €8.6 billion," the company said in a statement.
The deal with expected synergies valued between €5bn and €5.5bn will make Telefónica the second-largest telecom operator in Europe, with "a leading position in the largest and one of the most dynamic mobile markets", it added.
América Móvil Still Going for KPN Ownership
Despite supporting Telefónica, Slim's group reiterated its plans to fully acquire KPN, offering €7.2bn in cash for the remaining 70% stake.
"By achieving majority ownership, AMX believes it will be able to support KPN to a greater extent with its investment plans in a rapidly changing European environment," the Mexican group said in a statement.
Slim is seeking to expand his businesses in Europe in line with the consolidation of the telecommunications industry in the region. Despite the losses he has so far made in the region's telecom sector, he is pouring more money into it.
The value of KPN shares has come down significantly after América Móvil spent about $4bn increasing its stake in KPN last year, bidding €8 a share. Shares in Telekom Austria have also declined since Slim acquired a stake in the company last year.
KPN is yet to respond to América Móvil's move to increase its stake in the company.