PT SGPS shareholders have approved Oi’s €7.4bn sale of incumbent PT Portugal to telecoms group Altice.
At a shareholders’ meeting yesterday, PT SGPS, which holds a 25.6% stake in Oi following its merger with the Portuguese company, voted in…
PT SGPS shareholders have approved Oi’s €7.4bn sale of incumbent PT Portugal to telecoms group Altice.
At a shareholders’ meeting yesterday, PT SGPS, which holds a 25.6% stake in Oi following its merger with the Portuguese company, voted in favour of the deal, which is still subject to regulatory approval and is expected to close in Q2 2015.
PT SGPS’ general meeting was initially scheduled for 12 January but was postponed after Portuguese market regulator the CMVM asked the company to provide its shareholders with more information before they made a decision on the sale.
The combination between Oi and PT SGPS, first announced in October 2013, soured in July 2014 after Rioforte, a unit of collapsed banking group Banco Espirito Santo (BES), defaulted on a nearly €900m debt payment to the Portuguese operator. Oi claimed it was unaware of the investment, forcing PT SGPS to reduce its stake in the combined entity from 37.4% to 25.6%.
However, a recent independent analysis carried out by PwC highlighted some discrepancies on the matter, which led CMVM to ask PT SGPS to disclose more information.
In a statement today, Oi said the sale to Altice is also subject to a corporate restructuring aimed at identifying the assets that will be transferred to the group, as well as separate PT Portugal’s interests which are not included in the sale, including its investments in Rioforte.
Altice, which initially submitted a €7.03bn bid for PT Portugal in early November, later improved its offer to outbid a consortium including PE funds Apax Partners, Bain Capital and Portuguese holding Semapa.
Altice launches jumbo bond offering
To finance the acquisition, Luxembourg-based Altice has announced a €4.6bn bond issue.
The company is reportedly offering US$2.06bn and €500m of eight-year secured notes via Altice Financing, and US$385m of 10-year unsecured notes through Altice Finco. The eight-year paper is first callable at par plus 75% coupon.
Goldman Sachs, JP Morgan, Credit Suisse, Deutsche Bank, Morgan Stanley, BNP Paribas, Credit Agricole, Banca IMI, Citi, HSBC, Nomura, RBC, Societe Generale, and Unicredit acted as bookrunners on the offering.
Altice is also offering €500m and US$1.775bn of ten-year unsecured notes. JP Morgan and Goldman Sachs served as global coordinators, while the other banks were joint bookrunners.
A lawyer familiar with the situation told TelecomFinance that the Altice financing demonstrates that high-yield bonds are set to make a strong comeback in 2015. While junk financing was impacted by volatility in European markets at the end of last year, companies with solid balance sheets, in particular cablecos, will once again tap such bonds for large-scale acquisitions.
In addition, the company is arranging an €825m term loan, according to reports.
An investor roadshow will reportedly start in London today and then head to the US.
In a statement, Altice said the acquisition will result in the combination of PT Portugal with its Portuguese operations, cableco Cabovisao and telecoms unit Oni.
“We believe that after completion of the PT Portugal acquisition, we will be a leading telecommunications operator in B2C and B2B segment and the second largest service provider of B2C pay television services in Portugal,” the telco said.
Further to the deal, Altice management estimates total annual cost synergies impacting EBITDA and total annual synergies impacting capital expenditure to be approximately €100m and €40m, respectively.
The company also pointed out that PT Portugal’s market position in the mobile segment is complementary with Cabovisao’s fixed line-only operations, resulting in the creation of “a leading convergent operator in Portugal, with an attractive quadruple play offering”.
Deal-hungry Altice, which is owned by billionaire Patrick Drahi, recently completed its €13.6bn acquisition of French mobile operator SFR before merging it with its local cableco Numericable.
Besides France and Portugal, the group is also present in Belgium, Switzerland, Luxembourg, Israel and French overseas territories.
A bid for TIM more likely?
The long-awaited PT SGPS approval, which some have warned might lead to the end of the ill-fated merger with Oi, will enable the Brazilian telco to reduce its R$48bn (US$18.5bn) debt burden and play an active role in the consolidation process of Brazil’s telecoms market, as the company itself has often reiterated.
The telco could use the sale proceeds to launch a formal bid for Brazil’s second-largest player, Telecom Italia-owned TIM Brasil, which in turn has mulled an Oi takeover for some time.
Brazil-based Credit Suisse analyst Andrew Campbell believes that, once completed, the deal could pave the way for a merger between Oi and TIM as a more permanent solution to Oi’s stretched balance sheet and strategic challenges.
In a note to clients last November, Campbell had also said: “We believe consolidation is especially important for Oi, which we consider to be a subscale operator in the fourth position with only 14% market share of service revenues. Through consolidation, Oi and TIM could increase scale and enjoy more rational competition, and put the combined company on a path to healthier leverage levels.”
However, he also warned that, in spite of the sale, Oi’s leverage levels will still remain high, and expects management to continue to pursue buyers for its African assets, namely Unitel.
Oi shares rose by 20% yesterday following the sale approval.
Gontijo confirmed as CEO
In a separate statement, Oi has announced that its board confirmed Bayard De Paoli Gontijo as the company’s CEO. Previously the company’s CFO, Gontijo was appointed CEO on an interim basis in October last year, following the resignation of Zeinal Bava.
Bava, who joined the Brazil-based combined business in June 2013 having previously served as PT Portugal CEO, was reportedly instrumental in facilitating the merger which was first agreed in October 2013.
