BellSouth buys Safra bros out of BCP for $300 million, no Cellcom stock swap in works

TheMarker has learned the BCP deal was all-cash, while talks in Israel stalled on a $1 billion gap in Cellcom's pricetag
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U.S. domestic calls provider BellSouth Corporation (NYSE:BLS) bought the Safra family out of its stake in Brazilian cellular provider BCP for $300 million, TheMarker has learned. Until now BellSouth and the Safras had been partners in the company, each holding 44%.

The Brazilian company encountered financial difficulties and has not met repayment commitments. BellSouth therefore wrote off $250 million loans it had granted the company in the past. One of the key drivers of the write off was the devaluation of the Brazilian currency the real which led to a 15% drop in BellSouth revenues from its Latin American activity to $656 million. According to estimates, the Safras wrote off a similar sum on its identical stake in BCP.

The Brazilian company defaulted on $375 million in loans last month, but it is unclear what portion of that write off belongs to BellSouth, the Safra family or other shareholders. BCP owes $1.6 billion to a consortium of 40 banks, including ABN Amro and Citibank. Despite 1.7 million subscribers, the company has never achieved profitability.

In addition, BellSouth is in talks to sell its 34.8% stake in Israeli cellular provider Cellcom to the Safra brothers. Until a few days ago, the option of a swap in which BellSouth took over the Safras¿ BCP shares in exchange for its Cellcom holding, was under discussion, but was not exercised and BellSouth bought the Safras out of BCP in cash.

Sources close to the BellSouth-Safra talks report negotiations continue on a Safra Cellcom buyout but have encountered grave difficulties due to the huge gap between the parties valuations of the Israeli company. According to estimates, the Safra family and Discount Investment Corporation (TASE: DISI ) value Cellcom at $1.5 billion while BellSouth attaches a $2.5 billion price tag.