French media group Vivendi has entered into exclusive negotiations with Telefonica over the sale of its Brazilian broadband unit GVT, saying the Spanish incumbent’s offer is “particularly attractive”.
The announcement comes just a few hours after…
French media group Vivendi has entered into exclusive negotiations with Telefonica over the sale of its Brazilian broadband unit GVT, saying the Spanish incumbent’s offer is “particularly attractive”.
The announcement comes just a few hours after Vivendi said it received rival binding offers from both Telefonica and Telecom Italia (TI) for GVT.
Telefonica’s improved bid values GVT at €7.45bn (US$9.83bn) while TI’s offer values it at €7bn (US$9.23bn). Specifically, Telefonica’s bid includes a €4.66bn (US$6.15bn) cash component and a 12% stake in Telefonica Brasil’s (Vivo) shares, about a third of which Vivendi can exchange for 5.7% of the share capital and 8.3% of the voting rights in TI. The Spanish incumbent’s initial offer had valued GVT at about €6.7bn (US$8.83bn).
TI has offered a €1.7bn (US$2.24bn) cash component, 16% of the telco’s share capital and 21.7% of its voting rights, along with a 15% stake in TIM Brasil, its Brazilian mobile unit.
The two bids also include proposals for content partnerships. Telefonica’s offer expires tomorrow while TI’s expires on 20 September.
Vivendi’s supervisory board met this morning and concluded that Telefonica’s proposal is particularly attractive, saying it would generate a capital gain of more than €3bn.
“The other conditions of the offer, limiting to a strict minimum the risk of executing the operation as well as Vivendi’s commitments after the sale, are totally in line with Vivendi’s objectives,” the media group said in a statement.
Vivendi also noted that the agreement with Telefonica would enable the development of joint projects in content and media, and could see the French company become a shareholder in TI by exchanging its Brazilian shares for Italian ones.
After selling Maroc Telecom and agreeing to part with French mobile operator SFR earlier this year, Vivendi’s activities are now mainly focused on media and content with GVT being its last telecoms asset.
Today’s news follows weeks of speculation that the Italian incumbent would rival its largest individual shareholder Telefonica’s bid for GVT. Telefonica and TI own Brazil’s two largest mobile operators, Vivo and TIM respectively, so securing GVT would boost their position in the local market and help to offset slowing growth in Europe.
Almost five years ago, Telefonica had already tried to take control of GVT but lost out to Vivendi.
It remains unclear whether TI will come up with an improved offer. Its CEO Marco Patuano had previously said the company would assess all options for TIM but would not make “crazy offers”.
Before Vivendi announced it picked Telefonica for exclusive talks, Mirabaud Securities analyst Javier Mielgo had predicted that the Spanish telco’s offer was the most likely to be chosen.
“I think Telefonica is overpaying, although it may also be forced to do it,” he said. “After all the efforts done in TI, they cannot allow the Italians to strengthen their position in Brazil rather than divesting there and thus paving the way towards the consolidation of the Brazilian market.”
Telefonica’s holding in TI has caused regulatory problems in Brazil, where authorities expressed concern that the Spanish incumbent held too much sway. In December, antitrust regulator Cade told Telefonica to either reduce its stake in TI or find a new partner to take joint control of Vivo. Telefonica and Brazilian telco Oi reportedly discussed dividing TIM’s assets between Vivo, Oi and America Movil’s Claro. However, TI opposed the move. In July, Telefonica moved to cut its 14.77% stake in TI by as much as 6.5% by issuing a €750m exchangeable bond.
The GVT scenario is reminiscent of the sale process for Vivendi’s French mobile unit SFR earlier this year, when the company received rival offers from Altice and Bouygues. In a last-ditch effort to secure SFR, Bouygues sweetened its offer for the third time but lost out to Altice eventually. Vivendi’s stated reasons for choosing the €13.5bn Altice bid included the fact that it was expected to present the lowest regulatory risks.
TI denies knowledge of Oi’s designs on TIM
Separately, TI has announced it knows nothing about Oi’s plans to acquire a stake in TIM.
“The company, in confirming that TIM is a strategic asset on which it is committed to concentrating important investment and growth prospects, specifies it is completely extraneous to the Oi initiative …,” the Milan-based telco said.
This follows Oi’s announcement yesterday that it has hired BTG Pactual as a “commissioner” to review options for acquiring TI’s 67% stake in TIM.
Meanwhile, a recent Brazilian report recently claimed Vodafone is looking at entering the Brazilian mobile market, with TIM as its preferred target.
