KPN rejects approaches from EQT, KKR

KPN confirms that it rejected approaches from EQT/Stonepeak and KKR. There have been no discussions or negotiations. KPN claims that no price was mentioned (the FT claimed EQT offered 3 EUR/share = EUR 12.5b). KPN sees no added value from a takeover for its current strategy.

Observations:

• No added value means probably two things:
• EQT and KKR weren't raising the capex budget for FTTP.
• There will be no synergies from a takeover.
• An offer needs to be 'friendly' because EQT and KKR are investors, not telcos. They need the current management tema.
• KKR teamed up with rival T-Mobile NL instead, establishing an FTTP joint venture (Open Dutch Fiber). It must have seen a large enough opportunity in the Netherlands. Apparently, not only was T-Mobile NL shopping for an investor, KKR itself also shopped around to see if a deal with KPN could be made.
• The KPN share can still be seen as undervalued. Assuming full FTTP roll-out, it could be worth 4-5 EUR/share. KPN and its current shareholders would somehow need to split the difference. At 5 EUR/share it would be hard to create value. Hence 3.75 EUR/share come out as a nice middle ground.
• The Dutch government should be wary of an investor deal for KPN. It holds a right to block a deal if it would conflict with the 'essential infrastructure' status of KPN. There is a risk of selling assets and raising debt, for no other reason than to pay out as a dividend. The could jeopardise the FTTP capex budget. TDC and Eircom could serve as bad examples (victims of vulture capitalists), but today's owners show that a sound deal is possible too.