Wednesday, August 3, 2011

Telmex Offer Does Little for Shareholders -

Telmex Offer Does Little for Shareholders -

The Mexican billionaire Carlos Slim Helú’s $6.5 billion tender offer for Telmex offers little for shareholders in his América Móvil, the large cellphone carrier, to be happy about. América Móvil is buying out the remainder of Telmex, the country’s shrinking landline business, at a premium valuation relative to its own. That looks like a bad exchange.

If cost savings do not appear, it will take many years of the extra cash flow to compensate for the billions América Móvil is paying. Indeed, if Telmex keeps losing business, which seems inevitable, América Móvil may never reap an acceptable return on its investment. The $5 billion fall in América Móvil’s market value on Tuesday suggests minority investors would have preferred a dividend. But with Mr. Slim running the show, it does not really matter what other investors want.

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