EQT Is Said to Approach $13 Billion Carrier KPN on Takeover

EQT AB has approached Dutch phone company Royal KPN NV about a takeover, a sign the European private equity firm is moving ahead with a deal that would rank as its largest ever, people with knowledge of the matter said.

The buyout firm has been holding initial talks with Rotterdam-based KPN as it seeks to reach a friendly deal, according to the people. EQT is working with advisers and discussing financing for the potential purchase, the people said, asking not to be identified because the information is private.

KPN has the largest fiber-optic network footprint in the Netherlands, providing a good strategic fit with the rest of EQT’s portfolio, according to Neil Campling, an analyst at Mirabaud Securities Ltd. The private equity firm already has investments in German broadband provider Deutsche Glasfaser, Dutch telecom provider Delta Fiber and Maltese operator Melita.

“With so much private equity dry powder, even the forgotten value of telecom is beginning to attract PE interest given the low cost of capital,” Campling wrote by email Thursday.

Poison Pill

Shares of KPN extended gains in Thursday afternoon trading, rising as much as 11% to hit the highest level since January. They were up 6.3% at the close in Amsterdam, giving the company a market value of about 11.1 billion euros ($13.1 billion). Bloomberg News reported last month that EQT was in the early stages of considering the feasibility of a deal for KPN.

KPN bonds are pricing in a 40% chance of a buyout, according to Bloomberg Intelligence. A deal would require a sizeable premium and an accord with KPN’s board given the poison-pill mechanism at the company’s disposal, analyst Erhan Gurses wrote Thursday.

No final decisions have been made, and there’s no certainty the discussions will lead to an agreement, the people said. Representatives for EQT and KPN declined to comment.

Investment firms have been pursuing legacy telecommunications carriers to gain control of their underlying infrastructure, which can offer steady long-term returns. Acquirers have included Macquarie Infrastructure & Real Assets, which teamed up with pension funds to buy Nordic operator TDC A/S for 40.8 billion kroner ($6.5 billion) in 2018.

Fiber Networks

After that deal, Macquarie sold TDC’s Norwegian unit and split the rest of the company into two businesses: infrastructure owner TDC NET, which is rolling out high-speed fiber networks in Denmark, and consumer-facing Nuuday, which controls a variety of telephone, TV and entertainment brands.

KPN has been cutting costs and searching for new areas of growth after reporting declining sales for more than a decade. Its shares have been trading near an all-time low amid fierce competition from regional giants like Vodafone Group Plc.

The Dutch carrier reported last month that its adjusted revenue fell 3.7% in the third quarter, to 1.3 billion euros, after stripping out the effects of a divestment last year. Adjusted earnings before interest, taxes, depreciation and amortization rose 1.3% to 598 million euros on the same basis.

Takeover Interest

Chief Executive Officer Joost Farwerck said on a conference call after the results that KPN is focused on executing its strategy and declined to comment on any takeover interest. KPN is due to provide a strategy update Nov. 24, though it won’t have any major changes, according to Farwerck.

“Our strategy isn’t a sale,” he told reporters. “If somebody comes along with an interesting proposal, we can always listen, but we’re not focused on it.”

KPN has attracted suitors in the past. Early last year, Canada’s Brookfield Asset Management Inc. was considering making an offer in conjunction with Dutch pension funds, Bloomberg News reported at the time. That bid never materialized.

The phone company rebuffed a takeover bid in 2013 from America Movil SAB, the Latin American wireless operator controlled by billionaire Carlos Slim. America Movil is KPN’s largest shareholder with a 16% stake, according to data compiled by Bloomberg.

©2020 Bloomberg L.P.

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