Telefonica has agreed a €7.24bn (US$9.3bn) cash-and-stock deal to buy French conglomerate Vivendi’s Brazilian broadband unit GVT, bolstering its already strong position in the local market.
The Spanish telecoms giant will pay Vivendi €4.66bn…
Telefonica has agreed a €7.24bn (US$9.3bn) cash-and-stock deal to buy French conglomerate Vivendi’s Brazilian broadband unit GVT, bolstering its already strong position in the local market.
The Spanish telecoms giant will pay Vivendi €4.66bn (US$6bn) in cash, from which about €450m in debt and other obligations will de deducted, the Paris-based company said in a statement.
Vivendi will also receive a 7.4% stake in leading mobile player Telefonica Brasil (Vivo), valued at €2.02bn, and a 5.7% stake in Telecom Italia (TI), valued at €1.01bn. The 5.7% TI stake represents 8.3% of the Italian incumbent’s voting capital, Telefonica said in its own statement.
Vivendi will be liable for a tax payment of about €500m. The deal marks the sale of its last majority stake in a telecoms company, completing its transformation into a pure-play media company. Earlier this year, Vivendi sold its interest in Maroc Telecom and agreed to part with French mobile operator SFR.
The GVT transaction, which is subject to the approval of Brazilian authorities such as Anatel and Cade, comes about three weeks after Vivendi opted to enter exclusive talks with Telefonica, picking its bid over a €7bn offer from TI.
The companies expect the deal to close by the end of the first half of 2015.
As previously announced, Telefonica will fund the cash component of the transaction with a capital increase at its Brazilian mobile unit Vivo. The Madrid-based telco will subscribe to this to keep its current 74% stake, funding this, in turn, with a capital increase at group level.
Reiterating that the acquisition will generate at least €4.7bn (US$6.05bn) in synergies, Telefonica said the combined Brazilian unit will be the country’s largest integrated telecoms operator, leading both the mobile and broadband segments.
“The transaction allows Telefonica to enhance its positioning in one of its key markets and improve its growth profile and financial flexibility,” the telco said.
The acquisition of GVT, which owns a new-generation network passing more than 10.4 million homes in 21 Brazilian states, should enable Telefonica to better compete with local rivals America Movil and Oi in the broadband segment.
The deal will expand Telefonica’s footprint outside the largest city of Sao Paulo, where the majority of GVT’s 2.5 million broadband customers reside.
The Brazilian telecoms market looks likely to see more M&A activity in the not-too-distant future, with speculation mounting over what TI will decide to do with its Brazilian unit, TIM Brasil, the country’s second-largest mobile operator.
Earlier this week, Bloomberg cited three people familiar with the matter as saying the Italian telco is considering a bid for number four mobile player Oi. According to the report, TI has contacted advisers to discuss the possibility of acquiring Oi, which has a market value of R$14.2bn (US$6.1bn). However, TIM issued a statement later in the day saying TI had informed it there were no ongoing discussions regarding a possible deal with Oi.
TI CEO Marco Patuano has repeatedly described TIM, in which it has a 67% stake, as a core asset, but said the company remains open to all options in the country.
Meanwhile, Oi has hired BTG Pactual to advise it on a potential acquisition of TIM, and America Movil has said it is considering joining the company in a bid. Oi has reportedly also discussed the possible joint offer with Telefonica, planning to divide TIM between the three companies.
However, Vivo recently issued a statement in response to a local report claiming it would soon join Oi and America Movil in a bid for TIM, saying it does not know where this information came from and has no new material to convey to the market.
