KPN rejects € 18 billion takeover bid for EQT and Stonepeak

KPN has rejected a takeover bid worth around € 18 billion from a private equity consortium over the past two weeks, pressuring bidders to raise their prices from offer for the Dutch telecommunications group.

EQT and Stonepeak Infrastructure Partners have been circling KPN since last year and started performing due diligence earlier last month, according to several people with first-hand knowledge of the discussions.

They submitted an offer, but it was rejected by KPN’s board of directors, with the couple now considering whether to increase their offer, according to a person with first-hand knowledge of the situation.

EQT and Stonepeak were preparing a possible € 3 per share offer that would value the company at around € 12.5 billion. The company has 5.2 billion euros in debt, giving it an enterprise value of almost 18 billion euros at this level. Details of the potential offer were first reported by The Wall Street Journal.

KPN shares closed last week at € 2.87 after trading as low as € 2 before reports of an emerging recovery.

Such a deal would be one of the biggest private equity buyouts ever in Europe, according to data from Refinitiv. Advent International and Cinven took over the elevator business of Thyssenkrupp last year in a € 17.2 billion agreement that was the most important in years.

EQT declined to comment. Stonepeak and KPN did not immediately respond to requests for comment.

Joost Farwerck, CEO of KPN, said last week that any takeover bid should be seen to be in the best interests of employees and customers as well as shareholders.

Farwerck pointed to KPN’s investment in modernizing its telecommunications network as a sign of its intention to expand. “We’re going to create a lot of value, maybe not immediately in 12 months, but over several years,” he said on a media call.

KPN presented a plan to expand its fiber network to 80% of the population of the Netherlands by 2026 after forming a co-investment joint venture with APG, a Dutch pension fund.

Siyi He, an analyst at Citi, said in a note that accelerating the fiber program over the next three years is expected to value KPN at € 3.5 per share, so an offer at that level seemed possible.

The main obstacle to a takeover could be the Dutch government and whether it would allow a private equity consortium to acquire a critical domestic asset. A Dutch telecommunications veteran described it as an “almost impossible deal” as bidders will have to negotiate with a council that will likely be backed by the government, which could cancel any hostile bid.

KPN has long been seen as a potential takeover candidate, but potential buyers have been put off by the political risk.

América Móvil, the Mexican telecommunications company controlled by billionaire Carlos Slim, attempted to acquire KPN for 7.2 billion euros in 2013, but blocked by the intervention an independent foundation linked to the telecoms group. Slim still owns a fifth of KPN’s shares and in February raised 2.1 billion euros in bonds through a Dutch subsidiary which can also be converted into shares of the telecommunications company.

EQT, headquartered in Stockholm, is already active in European telecommunications, owning Delta Fiber, a small rival to KPN in the Netherlands, as well as telecommunications assets in Germany and Sweden. It struck a £ 3.3 billion deal last month to buy FirstGroup’s U.S. bus operations using its infrastructure fund. The units, First Student and First Transit, include tens of thousands of yellow school buses.

Stonepeak, based in New York, focuses on North American transactions.

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