Under the deal, Vivendi will get not only a 7.4% stake in Telefonica Brasil and €4.66bn in cash but has also opted to take off Telefonica’s hands its remaining stake in Telecom Italia – 8.3% of Telecom Italia’s voting share capital, or 5.7% of its total share capital.
Reuters/Paris/Madrid
French media group Vivendi has finalised an agreement to sell its Brazilian broadband business GVT to Spain’s Telefonica for cash and shares worth around €7.2bn ($9.29bn), the companies announced yesterday.
The deal is subject to regulatory approval in Brazil and is expected to complete by mid-2015.
Telefonica plans to fold GVT into its Vivo-branded Brazilian mobile phone business to create the country’s biggest telecom group, Telefonica Brasil.
Under the deal Vivendi will get not only a 7.4% stake in Telefonica Brasil and €4.66bn in cash but has also opted to take off Telefonica’s hands its remaining stake in Telecom Italia – 8.3% of Telecom Italia’s voting share capital, or 5.7% of its total share capital.
The move will make Vivendi, headed by Chairman Vincent Bollore who is already a powerful player in Italian business because of his 5% stake in investment bank Mediobanca, the largest shareholder in Telecom Italia.
Vivendi had had the option to take the shares in Telecom Italia or a further 4.6% of Telefonica Brasil. For Telefonica the deal brings its Brazilian mobile business and GVT’s broadband network together as telecom firms increasingly look to offer bundles of mobile and fixed line services including broadband internet and TV.
For Vivendi the GVT sale caps a tumultuous two-year overhaul during which it has sold three telecom businesses and its video games arm to pay down debt and focus more on media and content as part of a strategy championed by Bollore.
Part of Vivendi’s hunt for content will centre on Italy given its new stake in Telecom Italia following the GVT deal.
Analysts have suggested that initially a partnership between Vivendi, which owns French pay-TV operator Canal Plus, and Mediaset’s pay-TV arm Mediaset Premium could make sense.
In July Telefonica bought an 11% stake in Mediaset Premium for 100mn euros but has the right to sell the stake back if Mediaset finds another partner for the business, sources familiar with the situation have said.
Telefonica is Telecom Italia’s largest shareholder but the two have had a tense relationship as they also compete in Brazil.
The sale of the Telecom Italia stake to Vivendi and the conversion of a three-year exchangeable bond sold by Telefonica earlier this year will finally bring an end to the seven-year partnership.
Telecom Italia is in the midst of major changes to its ownership structure with the pending dissolution of Telco, the holding company that owns 22.4% of the group. Its members, Telefonica and Italian financial institutions Generali, Mediobanca and Intesa, have all said they want to sell.
Once the GVT sale and Telefonica’s convertible bond are taken into account and if there are no further changes to the shareholder base Vivendi will own 5.7% of Telecom Italia, Generali 4.3%, and Intesa and Mediobanca 1.6% each, said a Telecom Italia spokeswoman.
In the financial breakdown of the GVT deal, bank debt of around 450mn euros and adjustments in working capital will be deducted from the cash element. The Telefonica Brasil stake was valued at €2.02bn as of September18 and the Telecom Italia shares being acquired by Vivendi at €1.01bn.
Vivendi will also have a tax bill to pay on the sale estimated at around €500mn.
Telefonica, which will finance the deal through a capital increase by its Brazilian business and at the parent company, has estimated synergies of at least €4.7bn in Brazil from the deal.