European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

K P N - E Q T: Prospective Private Equity Bid

TalkTalk - Toscafund: Preliminary & Non-Binding Proposal

Altice - Next Private Takeover Announcement

Event-Driven

On 7 April, The Wall Street Journal reported that <a href="https://www.smartkarma.com/entities/eqt-ab" target="_blank" data-smartkarma-citation="entities:28922:1" rel="noopener">EQT AB (EQT SS)</a> and Stonepeak Infrastructure Partners LP are preparing a joint bid for <a href="https://www.smartkarma.com/entities/koninklijke-kpn-nv" target="_blank" data-smartkarma-citation="entities:21122:1" rel="noopener">Koninklijke KPN (KPN NA)</a>. Market rumours put the offer price at €3 per share. On 8 April, 55 million shares of KPN were traded.
On October 12, KPN shares shot up 10% amid rumors of a possible EQT takeover. KPN was then trading at €2.4 per share. KPN has a protection mechanism against takeover bids (Stichting), and the Dutch government has the right to veto offers, as it considers that the telecommunications network is critical infrastructure. Both are discussed in <a href="https://www.smartkarma.com/insights/k-p-n-e-q-t-prospective-private-equity-bid" target="_blank" data-smartkarma-citation="insights:44129" rel="noopener">K P N - E Q T: Prospective Private Equity Bid</a>. Carlos Slim (through <a href="https://www.smartkarma.com/entities/america-movil-sab-de-cv" target="_blank" data-smartkarma-citation="entities:24634:1" rel="noopener">America Movil Sab De Cv (AMXL MM)</a>) owns a 20% stake in KPN.
KPN has had a good run and gone over my TP from October, on a return to growth basis (see Capital IQ projections further in the next section), with M&amp;A optionality.
KPN has a strong management to run a mature business like the Dutch fixed line/fibre network operations. KPN Dutch's operations are efficiently run, with stable CF and estimated EBITDA margins above 45% for the period 2021e-2023e, in one of the most competitive and mature Telecom markets in Europe. KPN and Vodafone-Zigo are the top players, with T-Mobile the third major player.
Using Capital IQ consensus numbers, a 7.6x EV/EBITDA exit multiple, an acquisition premium of 10% to last closing price (€2.919 per share), an equity portion of 25% and spread of 250bps to 10-year Euro swap rates, I think an offer price of €3.212 could generate an IRR of 10.7% by year 8. And that is probably the bare minimum that the Board of KPN will be willing to discuss. Carlos Slim failed, EQT would not like history repeating itself.
On this basis, recommendation is long KPN, TP €3.211.
Shares should be sustained by a 4.7% dividend yield.

On 7 April, The Wall Street Journal reported that EQT AB (EQT SS) and Stonepeak Infrastructure Partners LP are preparing a joint bid for Koninklijke KPN (KPN NA). Market rumours put the offer price at €3 per share. On 8 April, 55 million shares of KPN were traded.
On October 12, KPN shares shot up 10% amid rumors of a possible EQT takeover. KPN was then trading at €2.4 per share. KPN has a protection mechanism against takeover bids (Stichting), and the Dutch government has the right to veto offers, as it considers that the telecommunications network is critical infrastructure. Both are discussed in K P N - E Q T: Prospective Private Equity Bid. Carlos Slim (through America Movil Sab De Cv (AMXL MM)) owns a 20% stake in KPN.
KPN has had a good run and gone over my TP from October, on a return to growth basis (see Capital IQ projections further in the next section), with M&amp;A optionality.
KPN has a strong management to run a mature business like the Dutch fixed line/fibre network operations. KPN Dutch's operations are efficiently run, with stable CF and estimated EBITDA margins above 45% for the period 2021e-2023e, in one of the most competitive and mature Telecom markets in Europe. KPN and Vodafone-Zigo are the top players, with T-Mobile the third major player.
Using Capital IQ consensus numbers, a 7.6x EV/EBITDA exit multiple, an acquisition premium of 10% to last closing price (€2.919 per share), an equity portion of 25% and spread of 250bps to 10-year Euro swap rates, I think an offer price of €3.212 could generate an IRR of 10.7% by year 8. And that is probably the bare minimum that the Board of KPN will be willing to discuss. Carlos Slim failed, EQT would not like history repeating itself.
On this basis, recommendation is long KPN, TP €3.211.
Shares should be sustained by a 4.7% dividend yield. 

K P N - E Q T Consortium: Prospective Bid (II)