Monday, 26 October 2020

Struggling KPN could be bought out by private equity firm EQT

by Harry Baldock, Total Telecom
Monday 12 October 20

Rumours suggest EQT could be lining up an offer of around $11.1 billion, according to anonymous sources

Even prior to the onset of the coronavirus, KPN was struggling to fight its corner in the highly competitive Dutch market. Its revenues have been declining for over a decade, with international powerhouse Vodafone and various domestic mergers making it difficult to compete, but 2020 has, unsurprisingly, seen the largest collapse in share value…

Even prior to the onset of the coronavirus, KPN was struggling to fight its corner in the highly competitive Dutch market. Its revenues have been declining for over a decade, with international powerhouse Vodafone and various domestic mergers making it difficult to compete, but 2020 has, unsurprisingly, seen the largest collapse in share value, plummeting 15% this year.
 
Now, anonymous sources have reported that private equity firm EQT could be lining up a takeover bid for the operator. Based on share prices, KPN is valued at around  $11.1 billion.
 
EQT is already a significant figure in the Dutch telecoms market, owning Delta Diber Netherlands, the country’s second largest fibre-to-the-home (FTTH). KPN remains the largest FTTH operator in the country, thus its acquisition by EQT would help to create a seemingly untouchable fibre behemoth. 
 
However, the path to taking control of the Dutch operator will not be an easy one. Earlier this year, the Dutch government introduced the Undesirable Control of Telecommunications Act, which aims to protect crucial national communications infrastructure from falling into foreign hands, jeopardising national security; in practise, the act means that the Ministry of Economic Affairs must be notified of takeover bids, with the Minister able to block the takeover if he deems such action necessary. 
 
This is not the only barrier that stands in the way. KPN itself has a foundation that allows it to quickly acquire stock to prevent a takeover if necessary. This foundation played a key role in staving off a major takeover attempt by America Movil back in 2013. As a result, EQT will have to present a compelling argument to both KPN and the government if it is to make headway.
 
The proposal is reportedly still in the very early stages of discussion within EQT, with no concrete plans to make an offer at this point, according to sources.
 
With its struggling financial position, KPN is becoming quite an attractive prospect for investors. Indeed, the Canadian firm Brookfield Asset Management was rumoured to be in discussion for a takeover attempt early last year, though a bid never ultimately materialised. 
 
 
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