July 28, 2016 / 11:55 AM / 2 years ago

Telekom Austria exchangeable bond launched as free float deadline looms

* America Movil must reduce 60 pct stake by September

* Telekom Austria shares fall 3.6 percent

VIENNA, July 28 (Reuters) - Citigroup said on Thursday it was launching a bond of up to 400 million euros ($443.8 million) exchangeable into shares of Telekom Austria, as a deadline approaches for parent America Movil to sell part of its stake in the Austrian company.

America Movil became the majority owner of Telekom Austria through a billion-dollar takeover offer in July 2014 that marked Mexican tycoon Carlos Slim’s first successful venture into operating in Europe.

When America Movil took control of Telekom Austria, Slim agreed to increase the free float of the former state monopoly within two years.

Under the agreement, America Movil has to increase Telekom Austria’s free float by the end of the year to 20 percent, from around 12 percent currently.

As a result, America Movil is expected to reduce its 59.7 percent stake in Telekom Austria by September this year to fulfil this agreement with Austria’s state holding company, which owns 28.4 percent of Telekom Austria.

Shares in the Austrian company are currently below the price of 7.15 euros at which America Movil last acquired a stake in 2014.

Telekom Austria shares were 5.12 euros by 1048 GMT, down 3.6 percent, compared with a 0.8 percent fall in the European telecoms sector.

“The exchange price is expected to be set within a range of 40 percent to 45 percent over the reference share price that will be based on the volume weighted average price of the ordinary shares... between launch and pricing,” Citi said.

Reuters calculations based on the current share price and the mid-point of that range suggest that if all exchange options were exercised 8.25 percent of Telekom’s stock would change hands.

Telekom Austria had no immediate comment and America Movil was not immediately available for comment.

America Movil has said it wants to use Telekom Austria as a base for further expansion into central and eastern Europe, where Telekom Austria already has operations in six countries. It has since supported a 1 billion euro capital increase. ($1 = 0.9014 euros) (Reporting By Shadia Nasralla, additional reporting by Francois Murphy. Editing by Jane Merriman)

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