World’s Richest Man Eyes Bargain Investments In Europe

May 8, 2012Investingby EW News Desk Team

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Mexico’s Carlos Slim, the world’s richest man, has embarked on his first major investment in Europe – a $3.4 billion (28 percent) stake in Dutch Telecom company Royal KPN – and is apparently ready to snap up more troubled assets in the region, said the Financial Times on Wednesday.

According to FT, the Mexican billionaire had been trying for years to enter the European telecom market, though his plans were often foiled by local political resistance.

Yet, with many European companies now struggling to deal with a crippling regional debt crisis, the time appears to be right for Slim to make his move.

“Slim is very good at buying good assets and management in a depressed market," said Damian Fraser, head of equities for Latin America at investment bank UBS, to the Wall Street Journal. "It's (KPN) quite a cheap stock, and gives him knowledge and a toehold into Europe."

"This is the ideal moment for Slim in Europe," added Slim's biographer in Mexico Jose Martinez to Reuters. "The business in the Netherlands would be an illustration of that. It's the spearhead to go looking for offers at this time of crisis."

On Monday, Slim’s America Movil, the largest wireless company in Latin America, offered KPN 8 euros per share for a 28 percent stake in the company. The move caused KPN shares to soar on Tuesday as investors speculated that Mr. Slim might move to take outright control of the company. By the end of the day, KPN's shares had risen by 17 percent Amsterdam to 7.58 euros.

The share bounce-back saw KPN representatives describe Slim’s move to have “substantially” undervalued the company. The Dutch company added that it would seek further clarification of America Movil’s intentions.

In response, America Movil promised that it was not looking to raise its holding in KPN to more than 28 percent and was seeking a "lasting relationship" with the company's management and shareholders.

Carlos Garcia Moreno, America Movil’s Chief Financial Officer, added the company was only trying to take a “closer look at the action in Europe” and had found KPN to be best suited for investment.

"KPN is the target for our first investment ... We have a long-term investment horizon," he told reporters. "We've taken our time. This one seems to make a lot of sense.”

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Nevertheless, some America Movil shareholders have expressed concerns on whether a buying spree in Europe might reduce dividend returns.

“We had hoped the company had given up expanding into Europe and that it would return the excess cash to shareholders,” said Carlos Sequeira, an analyst at Banco BTG Pactual SA in Rio de Janeiro. “It seems this is not the case.”

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