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EQT Is Said to Explore Takeover of $11 Billion Carrier KPN

Aaron Kirchfeld, Manuel Baigorri, Dinesh Nair, Jan-Henrik Förster and Ellen Proper
·3 mins read

(Bloomberg) -- EQT AB, the European private equity firm, is considering a takeover of Dutch phone company Royal KPN NV in what would be its largest-ever acquisition, people with knowledge of the matter said.

The buyout firm is in the early stages of discussing the feasibility of a deal with potential advisers, the people said, asking not to be identified because the information is private. Shares of KPN have fallen 15% in Amsterdam trading this year, giving the company a market value of about 9.4 billion euros ($11.1 billion).

No final decisions have been made, and there’s no certainty that EQT’s deliberations will lead to an offer, the people said. Any suitor would want to win the backing of KPN management and the Dutch government after the former telecom monopoly previously fought off an unwanted takeover.

“You have to come in with a very good story,” said InsingerGilissen Bankiers NV analyst Jos Versteeg. “It depends on the tact of the private equity guys.”

A law allowing the Dutch government to block a takeover of a telecom company was approved by both houses of parliament earlier this year, according to a spokesman for the Ministry of Economic Affairs. KPN also has a foundation in place that could act as a defense by enacting a protective measure enabling it to acquire enough stock to thwart an acquisition.

Also read: Brookfield’s Flatt May Have to Turn On Charm to Secure KPN

Representatives for EQT and KPN declined to comment.

“Both the Dutch government and the foundation at the top of KPN can refuse such a deal, for lots of good and bad reasons, not only financial ones,” said David Vagman, an analyst at ING Bank NV. “They can be political, strategic, chauvinism or management’s own interest, among other things.”

Mulitple Suitors

KPN, which is valued at about 16 billion euros including debt, has reported declining revenue for more than a decade. Its shares are trading near an all-time low amid fierce competition from regional giants like Vodafone Group Plc.

The company appointed Joost Farwerck as CEO a year ago to replace Maximo Ibarra, after KPN dropped former pick Dominique Leroy, who settled an insider trading probe with the Belgian market regulator in July. Farwerck took over a business that was cost cutting and in search of new revenue streams to ease competitive pressures in its home market, where rivals have been merging.

KPN has attracted multiple suitors in the past. It rebuffed a takeover bid in 2013 from its largest shareholder, America Movil SAB, the Latin American wireless operator controlled by billionaire Carlos Slim. 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.

Stockholm-based EQT teamed up with Digital Colony Partners to acquire fiber network owner Zayo Group Holdings Inc. in an $8 billion deal completed in March. It also has investments in Dutch telecom provider Delta Fiber, German broadband provider Deutsche Glasfaser and Maltese operator Melita.

The private equity firm is in the process of raising its fifth dedicated infrastructure fund and last month set a 15 billion-euro limit on the vehicle.

(Adds analyst comment in seventh paragraph.)

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