Mexican telecoms group America Movil said it remained committed to its 7.2-billion-euro ($9.5 billion) bid for Dutch group KPN but would abandon it if a foundation prepared to block the deal did not change its stance.
Late on Thursday, an independent foundation tasked with protecting the interests of KPN stakeholders exercised an option to buy shares that would give it almost 50 percent of KPN's voting stock, temporarily blocking the deal.
The foundation, set up when the former state monopoly was being privatized, said it was protecting the interests of shareholders, employees, customers, trade unions and "Dutch society more generally", which were at risk because America Movil had not consulted with KPN before announcing its offer.
America Movil, owned by multibillionaire Carlos Slim, denied its bid, priced at 2.40 euros a share, would put the company's interests at risk.
"We believe we can help make it into a better company, one that grows, creates jobs, is more competitive and ultimately is strong enough to remain a major player at home and abroad," America Movil said in a statement on Friday.
On Wednesday America Movil met with KPN's unions, saying they would keep the company's current strategy.
The foundation itself called for the company to open negotiations with KPN's board and the Dutch government.
"I think this is about a higher price and better conditions," a hedge fund investor in KPN said. "Maybe America Movil will raise its offer to 2.60, but if they withdraw the stock will trade between 2 and 2.10."
KPN's shares were down 6 percent at 2.15 euros at 0850 GMT on Friday.
America Movil already holds nearly 30 percent of KPN and offered to buy out the rest earlier this month.
On average, Slim's telecoms giant paid about 3.24 euros a share for its Dutch stake, including stock bought as part of a rights issue by KPN earlier this year.
America Movil has said that it had its financing for the bid in place and expected it to proceed in September.
Court challenge
Slim, who began 2013 as the world's richest man, could also try to fight the foundation's move in court.
"We wouldn't be surprised to see AMX go to (the European Union) to challenge the authority and legality of the foundation on the back of this move," said Imari Love, analyst at Morningstar. "It's clear the foundation is trying to keep KPN Dutch-owned by using this poison pill, which, in effect, has the same impact of golden shares, which are illegal."
Jorge Negrete, head of telecoms think-tank Mediatelecom in Mexico City, said: "This isn't about business, this seems to me to be clearly about protecting the European market."
There was no immediate comment from the European Commission.
Foundations such as KPN's have been used to try and gain an advantage in high-profile corporate battles, including luxury goods maker LVMH's failed hostile takeover of Gucci in 1999 and hedge funds' efforts to replace the board and break up chip equipment maker ASM International in 2008.
A number of analysts believe America Movil offered to buy the rest of KPN to squeeze more money from Slim's great rival in Latin America, Spanish company Telefonica, which is seeking to acquire KPN's German unit, E-Plus.
If so, the move paid off; earlier this week, Telefonica raised its offer by 6 percent to 8.55 billion euros, and it won America Movil's support for the deal.
The E-Plus sale will provide cash that will improve KPN's balance sheet, and, though it leaves the company without direct exposure to Europe's biggest mobile market, it makes America Movil's 2.40 euro a share offer less attractive, analysts said.
In a research note written before the KPN foundation's announcement, analysts at Sanford Bernstein said: "We think that KPN could be worth as much as 3 euros per share."