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TheStreet Open House

Telefonica Offers $8.9B for Vivendi's GVT

Stocks in this article: TEF

NEW YORK (The Deal) -- Spain's Telefonica (TEF - Get Report) on Tuesday offered to by Brazilian phone company GVT from French media company Vivendi for 20.1 billion reais ($8.89 billion) in a deal that could ultimately allay competition concerns in the South American country.

Telefonica said it would pay 11.9 billion reais in cash as well as a 12% stake in its enlarged Vivo Participacoes Brazilian unit for GVT, which Vivendi tried to sell last year but pulled off the block after bidders failed to meet the sticker price.

"A combination of Vivo and GVT would create the largest telecom operator in Latin America's largest market, providing a unique platform for the generation of synergies and value creation," Telefonica said.

In addition, Telefonica has offered to sell Vivendi an 8.3% stake in Telecom Italia that is left over from its unravelled Telco SpA joint venture.

Telco once controlled 22.4% of Telecom Italia but the venture collapsed this year as Telefonica's three partners -- Mediobanca, Assicurazioni Generali and Intesa Sanpaolo -- said they'd rather park their money elsewhere.

Buying into GVT would allow Telefonica to bolster its position in South America's biggest phone market while continuing to back away from Telecom Italia. The minority Telecom Italia holding led to December intervention by Brazil's Cade competition regulator.

The watchdog was concerned because Telefonica already controls Vivo Participacoes, Brazil's biggest wireless services company. Meanwhile Telecom Italia controls TIM Participacoes, the country's second-largest wireless services company, giving the Spanish provider at least some say in both of Brazil's biggest cellular companies.

Vivendi appeared surprised by the approach.

"Vivendi wishes to emphasize that none of its subsidiaries are for sale," it said. "However, the Vivendi supervisory board will consider the Telefonica offer at its next meeting, in the best interests of its shareholders and the GVT employees, and will decide what action to take as a result."

GVT is one of the few remaining phone businesses at Vivendi, which has worked to become a pure media company through asset sales. The Paris-based company in May completed the sale of a 53% stake in Maroc Telecom to Emirates Telecommunications Corp. for $5.7 billion.

In April it agreed to sell its Societe Francaise de Radiotelephone, France's second-largest mobile phone company, to Numericable SA, a cable company, and its backer Altice SA, for 17 billion euros ($22.8 billion).

Vivendi pulled GVT off the market in March of 2013 after bidders Kohlberg Kravis Roberts & Co. and DirecTV LLC failed to meet the seller's 7 billion euro price tag.

GVT, a fixed-line phone company, is Brazil's biggest broadband provider. Last year it had revenue of 1.71 billion euros resulting in Ebitda of 707 million euros.

Vivendi shares rose 3.1%, or 0.585 euro, to 19.49 euros in Paris while Telefonica shares slipped 1.8%, or 0.21 euro, to 11.78 euros in Madrid.

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