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KPN to Bid $1.05 Billion for Getronics


Royal KPN, the Dutch telecommunications company, said Monday it intends to launch a management-backed 766 million euros ($1.05 billion) bid for IT services company Getronics.

The bid of 6.25 euros ($8.56) per share is a 23% premium to Getronic's closing price Friday of 5.10 euros ($6.99).

The move is a bolt from the blue, as Getronics recently had broken off merger discussions with a U.S. acquirer, and the strategic rationale for combining the two companies was not immediately apparent.

But KPN said the proposed acquisition "will reinforce the stated ICT strategy of KPN's business segment and further transform KPN from a communication service provider to an end-to-end provider of ICT services."

"Telecommunications and IT services are increasingly becoming two sides of the same coin, as more and more companies are converging their telecoms and IT requirements, sourcing all services from a single end-to-end vendor" said KPN Chief Executive Ad Scheepbouwer in a statement.

"Combining Getronics' business with our own will immediately add value and be transformational for our existing ICT business. It will give us in one step real critical mass and significant expertise, enhancing our opportunity to become the ICT partner of choice for our widened client-base in our key territories."

KPN said it would be able to make good use of more than 100 million euros ($140 million) in tax write-offs Getronics has due to previous losses.

Getronics ran into trouble after it bought Wang Global in 1999, only to be slammed by the 2001 market downturn while debt levels were high. In 2005, it was struck again by losses and due to fraud at its Italian arm, and has since violated its banking covenants several times.

Separately, KPN reported second quarter earnings of 401 million euros ($549 million), down from 431 million euros, which the company said was due to a decline in profits from its fixed-line operations in the Netherlands, which must compete with Internet-based voice services. The decrease was offset by strong growth at the company's mobile telephony provider E-Plus, which is the third-largest in Germany.

KPN's sales rose 1% to 3.01 billion euros ($4.12 billion) from 2.98 billion euros.

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