Business Context and Reporting Period
This Form 6-K, filed on March 25, 2010, by América Móvil, S.A.B. de C.V. (AMX), discloses an English translation of a draft information memorandum filed with Mexico's National Banking and Securities Commission (CNBV). The filing details a proposed public offer to acquire 100% of the outstanding Series A-1 shares of Carso Global Telecom, S.A.B. de C.V. (TELECOM). The offering period is scheduled to run from April 7, 2010, through May 5, 2010, with a settlement date of May 11, 2010.
Key Financial Metrics and Offer Terms
- Offer Structure: A concurrent purchase and subscription offer. AMX will purchase TELECOM shares in exchange for AMX Series L limited-voting shares.
- Exchange Ratio: 2.0474 Series L shares of AMX for each Series A-1 share of TELECOM.
- Aggregate Reference Price: Approximately Ps. 222,839,357,592 (Mexican Pesos), based on a reference price of Ps. 64.00 per TELECOM share.
- Shares Involved: Up to 3,481,765,200 TELECOM shares (100% of capital) for up to 7,128,566,070 AMX Series L shares (approx. 22% of AMX outstanding capital).
- TELECOM Net Debt: Approximately Ps. 23 billion as of December 31, 2009.
- Valuation Multiples: The offer price represents 3.274x TELECOM's book value and 13.92x its majority net income (as of Dec 31, 2009). The price is 1.02x the closing price of Ps. 62.73 on January 13, 2010.
- Transaction Costs: Estimated at approximately Ps. 20 million for both the TELECOM and concurrent TELINT offers.
Material Changes and Strategic Rationale
The filing represents a material strategic shift intended to consolidate telecommunications operations in Latin America. AMX aims to integrate its wireless services with TELECOM's assets, which include significant holdings in Teléfonos de México (TELMEX) and Telmex Internacional (TELINT). The transaction is designed to create synergies, improve network efficiency, and offer integrated voice, data, and video services. If consummated, AMX intends to delist TELECOM from the Mexican Stock Exchange (BMV) and cancel its registration with the National Securities Registry (RNV), provided at least 95% of shareholders consent.
Guidance, Outlook, Risks, and Contingencies
- Management Commentary: AMX management believes the combination will strengthen its position as a world-class company with nearly 250 million customers. Independent experts (Credit Suisse for AMX and Santander for TELECOM) have opined that the exchange ratio is fair and reasonable from a financial perspective.
- Conditions Precedent: The offer is subject to regulatory approvals (including CNBV and Federal Competition Commission), corporate approvals, and the absence of adverse governmental actions or material adverse changes in market conditions.
- Risks:
- Liquidity Risk: Shareholders who do not tender shares may be left with illiquid securities in a privately held company if the delisting is approved.
- Regulatory Risk: Integration may be hindered by regulatory restrictions in countries like Brazil (Anatel) or Mexico (Federal Competition Commission).
- Integration Risk: AMX may fail to realize anticipated cost savings or revenue synergies.
- Contingencies: If the offer is successful but less than 100% of shares are tendered, AMX may establish a trust to allow remaining shareholders to exchange their shares at the same ratio for six months post-delisting.
Important Facts for Investor Verification
- Verify the final approval status of the offer by the CNBV and the Federal Competition Commission.
- Confirm the percentage of TELECOM shares tendered by the Expiration Date (May 5, 2010) to assess the likelihood of delisting.
- Review the specific tax implications for individual shareholders based on residency status (Mexican resident vs. non-resident).
- Monitor the concurrent offer for TELINT shares, as the TELECOM offer is linked to the broader reorganization strategy.
- Check for any material changes to the terms of the offer or extensions of the offering period announced via EMISNET or national newspapers.