KPN – Closing the position flat

*We liked the name for the upside in an M&A scenario but with the seemingly low bids coming in, KKR walking away and government still not that stable we are starting to doubt if the timing for such an acquisition is right

*Even if the deal is agreed at the speculated EUR 3.5 we expect the deal to trade at a large spread to reflect the risks involved regarding approvals from board, government, foundation, antitrust etc

*We could look to add again on weakness but see the risk reward at these levels with a lot of investor playing the deal as too large

KPN Update +0.2% – Holding for now as we continue to see value

Tuesday • 04 May 2021 • 11:11

Stock now -0.8% from Friday’s level after the company confirmed a press report this weekend that it has rejected two unrelated unsolicited approaches from EQT-Stonepeak and KKR – while we are excited to hear firm news about approaches we are not adding here

Proposition from EQT did not include an offer price – Reports over the weekend were that the EQT approach came in at EUR 3 which has disappointed the market as market was factoring in EUR 3.5 minimum

No price indicated for KKR, some analysts are saying that could be that board was not happy with the structure / strategy and therefore price irrelevant, we see this as reading too much into it, we think there could be several other reasons for no specific price, could be that the board did not expect a governmental approval with an acceptance structure and therefore never got to a price

We still like the name as at these levels we still see low downside (EUR 2.6-2.7)

For a successful bid we expect they need to pay up > EUR 3.5 and for now with the JV with the Dutch pension fund and elections having passed the timing seems right although it might take some time to get an agreement in place with the government which will be key along with company backing, hence the price will also be important and we agree with the board that EUR 3 is not close to sufficient  – standalone we also come to a valuation of around EUR 3.5

BUY KPN NA – All lining up, +30% upside potential

Tuesday • 30 March 2021 • 11:52

*We continue to see KPN cheap as our DCF valuation comes in around EUR 3.75 which leaves a +30% upside

*With the elections out of the way, the Green party having lost half of their seats, and KPN’s agreement with APG (Dutch pension fund) to participate in a joint venture to further accelerate the fiber rollout in the Netherlands, we see a clear path to for any (long speculated) PE buyer to approach the government to negotiate approval for a bid

*We have through the last months expected that any foreign buyer would need a local partner in order for a successful bid – similar to what we saw when Macquarie launched a bid for TDC DC

*The 2023 Ambitions and further acceleration of the fiber rollout leaves good prospects for the company as a standalone as well although we see a potential for the stock dropping to around EUR 2.6 in case arbs lose hope in the name but see the +30/-10% risk reward as attractive here