Spanish incumbent Telefonica today confirmed that it has agreed to pay E7.5bn for the 50% of Vivo holding company JV Brasilcel owned by partner Portugal Telecom. The deal was reportedly reached last night, and then approved by the boards of both…
Spanish incumbent Telefonica today confirmed that it has agreed to pay E7.5bn for the 50% of Vivo holding company JV Brasilcel owned by partner Portugal Telecom. The deal was reportedly reached last night, and then approved by the boards of both operators today.
The Spanish operator said it would pay Portugal Telecom an initial E4.5bn payment upon completion, a second E1bn instalment on December 31, 2010 and a final E2bn payment on October 31, 2011. The thrice-improved offer clocks in at about 10x Vivo’s expected EBITDA for 2010. For Portugal Telecom, the offer price is larger than its E7.44bn market cap.
Telefonica chairman Cesar Alierta said: “We are delighted to have reached this agreement with Portugal Telecom which benefits both companies’ shareholders. It is a unique value creation opportunity. Vivo leads the Brazilian mobile telephony market, a market to which Telefonica is strategically committed”. The company said its strategic objectives in Brazil have now been achieved.
Spain’s El Pais reported that Portugal Telecom is planning to spend half of the offer price on buying some 20-25% of Brazilian mobile operator Oi. These talks are reportedly ongoing.
Telefonica said the transaction is expected to close within 60 days, once it obtains the necessary Brazilian regulatory approvals. Once this is complete, Telefonica will present a public tender offer for the ordinary shares of Vivo that are not held by Brasilcel and which represent approximately 3.8% of Vivo’s equity, an estimated transaction of E800m.
It added that additional improvements that had been part of its second offer, which included the distribution of accrued Vivo dividends and a call option on PT shares, were no longer applicable.
Telefonica plans to merge Vivo with its Brazilian fixed-line operation, Telesp. The Spanish operator said that the combined entity would form Brazil’s largest integrated operator in terms of customer numbers (69.2 million to March 2010), revenue/OIBDA (E11.8bn and E4.1bn in 2009, respectively), and profitability (OIBDA margin 2009: 35%).
