MasMovil Shareholder Calls for Improved Offer

AllianceBernstein says KKR, Cinven and Providence's consortium bid for MasMovil substantially undervalues the Spanish telco.

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AllianceBernstein LP has criticized a private equity consortium’s bid for Spanish telecoms company MasMovil Ibercom SA as too low and called on the target’s board to seek better terms or shop for rival offers.

Buyout funds KKR & Co., Cinven Partners LLP and Providence Equity Partners LLC launched a €2.96 billion ($3.34 billion) offer for MasMovil on June 1, which was backed by the Madrid-based company’s board.

Alliance Bernstein, which has built a stake of about 2% in the company, said on Tuesday, June 9, however, that it had concerns not only about the offer price of €22.5 per share but about the independence of the board.

“We believe the bid substantially undervalues MasMovil, based on management’s own forecasts for free cash flow generation,” it said in an emailed statement. “As a fiduciary to our clients, we have expressed our concerns to the company’s board asking them to seek better terms, including potentially from other bidders.

“We hope that the board will ensure shareholder value is maximized in the takeover process and are concerned with the optics of the situation due to the fact that four board members may now have dual interests having joined the bidding consortium.”

AllianceBernstein declined to identify the directors concerned, although one is likely to be Providence’s John Hahn. Hahn sits on the board as a proprietary director, according to Boardex, a relationship mapping sister company of The Deal, by virtue of the private equity fund’s existing 9.16% stake in MasMovil. Providence has already pledged the shares to the consortium’s bid vehicle Lorca Telecom BidCo. SAU.

Analysts Jerry Delis, Martin Hammerschmidt, Ulrich Rathe and Alex Caldwell of Jefferies International Ltd. said in a June 1 note that the private equity firms likely felt the public markets were not fully valuing MasMovil’s prospects for growth and margin expansion.

MasMovil is the No. 4 player in Spain’s highly competitive market, but with increased private equity backing could play a part in market consolidation. The consortium is reportedly eyeing a possible bid for the Spanish business of Vodafone Group plc, which has done poorly in the country in recent years.

Several international investors have increased their holdings or taken new positions in the company since the end of May, according to Factset Research Systems Inc. As well as AllianceBernstein, Wellington Management International Ltd. and Capital Research & Management Co. are now among the largest institutional shareholders in the company. As of Wednesday, BlackRock Inc. (BLK) had built a stake of 6.49%, according to Reuters.

Neither MasMovil nor the consortium replied to requests for comment.

MasMovil shares have consistently traded above the offer price since the deal was announced and were trading hands at €23 in midafternoon trading on the Madrid exchange on Wednesday.

In the deal announced on June 1, the private equity consortium turned to Morgan Stanley and Barclays for financial advice and tapped Jose Armando Albarran of Freshfields Bruckhaus Deringer LLP for external counsel. Also advising were Alvaro Membrillera of Paul, Weiss, Rifkind, Wharton & Garrison LLP and Lewis Blakey of Weil, Gotshal & Manges LLP.

Shapur Kabraji of Simpson Thacher LLP advised KKR, while Javier Redonet and Christian Hoedl of UrÍa Menéndez advised Providence.

Goldman Sachs Group Inc. and Luis Alonso of law firm Clifford Chance LLP are advising MasMovil.

Follow Jonathan Braude on Twitter and LinkedIn.

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