Telefonica SA agreed to buy Portugal Telecom SGPS SA’s stake in Vivo Participacoes SA, Brazil’s largest wireless company, after raising its bid for a third time to 7.5 billion euros ($9.8 billion).
Telefonica will initially pay 4.5 billion euros in the all- cash deal, followed by 1 billion euros at the end of the year and the rest in 2011, the company said in a statement. Separately, Portugal Telecom agreed to pay 8.44 billion reais ($4.8 billion) for 22.4 per cent stake in Brazil’s biggest phone operator Telemar Norte Leste, known as Oi.
The Vivo accord ends almost three months of wrangling during which the Portuguese company’s board sought more money and the country’s government blocked the deal calling the stake “strategic”. Telefonica Chairman Cesar Alierta raised his initial offer by 32 per cent to gain control of Vivo, which he wants to merge with the Spanish company’s Brazilian fixed-line unit Telecomunicacoes de Sao Paulo SA, or Telesp, to ride the growth in the Latin American country as business slows at home.
“Strategically, this was clearly necessary for Telefonica and the price reflects that,” said Alberto Espelosin, who helps manage about $12 billion at Ibercaja Gestion in Zaragoza, Spain, and owns Telefonica shares.
Both companies have sought growth in Brazil as markets at home have cooled. Vivo said today it ended the second quarter with 56 million clients. The carrier controls 30 per cent of the Brazilian mobile-phone market, according to Anatel, the country’s phone regulator. Brazil’s economy is growing at the fastest pace in more than two decades.
Bigger than whole
Portugal Telecom shares gained as much as 6.6 per cent to 8.85 euros and traded at 8.704 euros as of 1:43 pm in Lisbon. Telefonica rose 0.6 per cent to 16.985 euros in Madrid, giving the company a market value of 77.5 billion euros.
Telefonica’s latest offer for Portugal Telecom’s stake in Brasilcel NV, their 50-50 venture that owns 60 per cent of Vivo, is greater than the market value Portugal Telecom had yesterday of 7.44 billion euros.
“Portugal Telecom did a very good job for their shareholders,” said Andrew Hogley, analyst at Execution Noble Ltd in London.
