KPN Faces Another Takeover, This Time With a Stronger Defense

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The Dutch government has not implemented a ban, and KPN is still working with Huawei. However, it is choosing a Western vendor for its more sensitive core network.

Before Stockholm-based EQT has to face foundations and politicians, a price needs to be agreed. Shares of KPN have fallen 15% in Amsterdam trading this year and are near an all-time low, giving the company a market value of about 9.4 billion euros ($11.1 billion). That’s just under America Movil’s bid offer seven years ago.

“I think the KPN shares are undervalued and I can thus understand interest from private equity,” said Zomer. “Without any takeover premium I think the company is already worth 40-50% more than the current market value.”

Any bid would be a test for Chief Executive Officer Joost Farwerck, who has been in role for only a year, and has been struggling with a weak consumer unit and the pandemic.

Investment firm EQT’s interest in KPN, reported by Bloomberg News, would require a sizable premium for a successful bid, as well as an accord with the board and government on the level of infrastructure investments and employment. This could rule out an intervention by the KPN Foundation, which has an effective poison pill mechanism, and may tempt America Movil to sell its 16% stake, which was built at a high cost of 2.54 euros a share.

Erhan Gurses, analyst, Bloomberg Intelligence

EQT does have plenty of experience in telecom deals. It joined with Digital Colony Partners to acquire fiber network owner Zayo Group Holdings Inc. in an $8 billion deal completed in March, and invested in Dutch telecom provider Delta Fiber, German broadband provider Deutsche Glasfaser and Maltese operator Melita.

But other analysts are not convinced EQT can overcome the problems facing a Dutch telecom takeover. “We believe the probability of a takeover is low,” said Emmanuel Carlier, analyst at Kempen.

©2020 Bloomberg L.P.

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