By Arnout Nuijt
Late Thursday night news broke that Dutch telecoms firm KPN had activated its firewall against a hostile takeover by Mexican magnate Carlos Slim. A foundation, led by a handful of venerable representatives from Dutch business circles, exercised its right to emit emergency shares that would give it nearly 50% of voting rights on KPN’s board. Such foundations are commonplace among Dutch larger companies, as the country’s economic establishment abhors takeovers that have not been the result of lengthy negotiations with shareholders, management and employees.
Mr Slim could and should have known. Was he misinformed or did he believe that he could pull this off, just as he had pulled off other takeovers? Was this miscalculation the result of a magnate’s autocratic management style or just plain hubris of the world’s richest man? The thing is when Dutchmen or other Europeans intend to invest in Mexico, Brazil or other places, they are told to get themselves acquainted with local business styles, to get a local partner who knows the specific particularities of the market and who has an excellent network. The potential investor is also told that he will be in for the long run and he should take his time. Do Latin American investors receive similar advice about investing in the Netherlands? If not, they should.
Dutch daily Financieel Dagblad reported Saturday that KPN’s foundation had been waiting in the wings for a long time before it made its move. In its editorial on the same day FD wrote that the foundation’s actions were completely justified. Mr Slim did not play by the rules, because there is no clear picture of what will happen to KPN after his takeover. Instead, the foundation now invites Mr Slim to sit down with KPN and draw up a takeover protocol together. Mr Slim immediately threatened to withdraw his offer for KPN shares and KPN’s share price sank well below the price offered by him.
Hostile takeovers in the Netherlands are rare. This is a country that believes in consensus making. Foreign magnates are automatically regarded with suspicion in the Netherlands, where egalitarian sentiments are alive and kicking, fuelled by both Calvinist and social-democratic undercurrents. Large stock listed companies ruled by autocrats do not exist. There are simply too many checks and balances for bosses to really be the Boss.
Most companies have drawn up their defences and are ready to use them in case of hostile – meaning non negotiated – takeovers, even at great cost. To recall one example: in the late 1980s Norwegian investor Torstein Hagen made a hostile takeover attempt for Nedlloyd, a Dutch shipping company. Nedlloyd management panicked, dug in and years of defensive manoeuvring followed, while the company was going down. Hagen even moved to Rotterdam and showed the best intentions, but to no avail.
Let’s hope the KPN case will not end in lengthy destructive moves. América Móvil’s other shareholders would suffer as well. Among them is AT&T, once rumoured to have plans for KPN too. These rumours did receive good press in the Netherlands, contrary to Mr Slims plans, who was recently cartoonized as a pistolero by Dutch quality newspaper NRC. That was maybe too easy, but the cartoon was a bad sign for Mr Slim.
Mr Slim still holds almost 30% of KPN shares, a percentage that may become even higher at the outcome of his share offer, if continued. But with the foundation effectively blocking a full takeover, what can Mr Slim do? If Mr Slim decides to hang on to his share, he will not gain a stronger say in KPN. To avoid lengthy and destructive standoffs for both KPN and América Móvil, Mr Slim might try to sell his part. But who would buy? AT&T perhaps?
In any case Mr Slim’s adventures in the Netherlands appear to be coming to an end. Just remember, in Holland the boss is never a Boss. Saludos, jefe!
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2 thoughts on “Why Carlos Slim will fail to win KPN”
Mr. Nuijt, thank you for your analysis. As for your cultural observations: egalitarian and calvinistic undercurrents may indeed be responsible for the nations’ reluctance to foreign takeovers. One might say that these are part of a heritage which goes back centuries. However, a ‘modern’ component may also be responsible. This may be referred to as a developing nationalist, anti-liberal, or even populist sentiment, caused by events like the involuntarily farewells to companies like KLM and Fokker and regrets over privatization of the national railways. Former objects of national pride, currently examples for those who feel we have to reconsider globalisation. Needless to say that the debt- and euro-crises add fuel to these ideas and we may thus find ourselves in this mood for the next decade or so. More companies will be fencing off ‘hostile’ takeovers and some will even plea for national firewalls-by-law. Influencial as these sentiments may prove to be, in time they will give way to yet another, much more potent Dutch tradition. We will still be merchants.
Mr Beerden, thank you for your comments.
Indeed, the sentiments you describe are very present in our society at the moment, whether of a more nationalist nature (preserving national pride) or a more socialist (the state should take care and own our utilities). But was KPN’s foundation fed by these sentiments when they made their move? That is not likely, I think.
They are merely concerned for the company’s interest, unless the state, as KPN’s former owner, added a paragraph to the foundation’s mission, stating that foreign takeovers (from outside the EU) would have to be prevented if there was a risk to the interests of the Dutch people.
And there are risks. Dutch press reported on Monday that the NCTV, the Dutch National Coordinator For Anti-Terrorism & Security is looking into Mr Slim’s case. See for instance this quote from Telecompaper:
“It’s not clear yet whether the proposed sale of KPN to America Movil would have an impact on national security, according to the Netherlands’ national coordinator for anti-terrorism and security,..”
and the NCTV added that they
“would need to see if this would lead to any changes in government oversight of KPN. Issues such as the impact on the 112 emergency number and the C2000 emergency communications network would also need to be assessed to see if additional measures are needed to safeguard public interests.”
América Móvil would – after a successful bid for KPN – be the owner of some vital networks that are closely associated with Dutch national security.