This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Telefonica, Telecom Italia Are in Bid War Over Vivendi's GVT

PARIS ( The Deal) -- Telefonica and Telecom Italia on Thursday unveiled rival bids for Vivendi's Brazilian broadband unit GVT, embarking on a bid battle that could be decided by the end of the week.

Telecom Italia made a stock-heavy offer for GVT worth 7 billion euros ($9.2 billion), topping a previous offer from Telefonica that had valued GVT at 6.7 billion euros. The Spanish company increased the cash component of its offer to boost the total value of its cash-and-share bid to 7.45 billion euros.

"The Vivendi Supervisory Board, which meets today, will examine the two offers in the best interests of Vivendi shareholders and GVT employees, and will decide what actions to take as a result," Vivendi said.

The competition for GVT is reward for Vivendi's long wait by the telephone. The Paris-based media group put the Brazilian unit on the block in 2012 before suspending the auction in March 2013 after bidders, including DirecTV LLC and Kohlberg Kravis Roberts & Co. LP, failed to meet a 7 billion euro reserve price.

The bidding war pits Telecom Italia against its largest shareholder Telefonica, with both companies hoping to combine GVT with their existing Brazilian operations. Both companies consider the Brazilian market central to their efforts to inject growth into businesses whose home European markets have stagnated.

Telecom Italia's offer includes 1.7 billion euros in cash, shares that would leave Vivendi with 16% of Telecom Italia's capital and 21.7% of its voting rights and a 15% stake in a combined GVT and TIM Participacoes, the Italian company's Brazilian unit.

"The resulting offer is therefore comprised of around 24% of cash and of around 76% of shares, offering to Vivendi a significant value upside potential," Telecom Italia said.

Telefonica's improved bid includes 4.66 billion euros in cash and a 12% stake in a combined GVT and Telefonica Brasil SA. Madrid-based Telefonica also added two twists to its bid: setting a deadline of the end of Friday for Vivendi to accept its offer and including an option for Vivendi to swap its stake in GVT/Telefonicia Brasil for the 8.3% of Telecom Italia owned by Telefonica.

Telefonica has been selling shares in Telecom Italia after Brazil's competition regulator, known as Cade, in December told the Spanish group that it has to sell either its holding its Telecom Italia or sell its Brazilian operation.

Telefonica Brasil and TIM are Brasil's No.1 and No. 2 wireless service providers, with about 29% and 27% of the market respectively. The Brazlian operations of America Movil SAB de CV (AMX) , which is owned by Carlos Slim, has about 25% of the market, while Oi has 19%. Not wanting to be sidelined in the current consolidation, Oi said on Tuesday it had asked BTG Pactual SA to work on a possible bid for Telecom Italia's 67% TIM stake.

Both Telefonica and Telecom Italia said they would partly fund the cash portion of their bids for GVT through a capital increase at their Brazilian units.

GVT is Brazil's No. 4 telecoms provider, with about 12% of the broadband market and 9% of the fixed-line business, according to Vivendi. The French company bought GVT in 2009 and 2010 for about $3 billion.

The Brazilian operation is Vivendi's last significant telecom asset, following a two-year overhaul that has focused the former conglomerate on its media operations. Vivendi has sold or agreed to sell more than $32 billion of assets since 2012 including its North African telecoms unit Maroc Telecom SA, French mobile operation Societe Francaise de Radiotelephone, or SFR, and a stake in game maker Activision Blizzard  (ATVI) .

The sale of GVT will leave Vivendi with only its French pay-TV operation Canal Plus and music label Universal Music Group Inc. Vivendi has said that it will use cash from its sales to pay down debt, which stood at about 11 billion euros at the end of 2013.

The sale of GVT would further boost Vivendi's net cash, which Standard & Poor's Rating Services said earlier this year was likely to be about 5 billion euros following the sale of SFR.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.49 0.91%
FB $117.69 -0.74%
GOOG $692.94 -0.75%
TSLA $233.96 -3.20%
YHOO $36.00 -1.40%


Chart of I:DJI
DOW 17,699.37 -191.79 -1.07%
S&P 500 2,060.40 -21.03 -1.01%
NASDAQ 4,763.4950 -54.0990 -1.12%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs