Bloomberg News

Espirito Santo Chief Says Zon Stake Is ‘Less Strategic’

January 16, 2012

(Updates with analyst comment in fifth paragraph, comment from investor in final two.)

Jan. 13 (Bloomberg) -- Banco Espirito Santo SA’s stake in Zon Multimedia SGPS SA is less strategic than holdings in other companies such as Portugal Telecom SGPS SA, Chief Executive Officer Ricardo Salgado said.

Espirito Santo’s “stake in Zon doesn’t have the same strategic weight,” Salgado said in an interview yesterday during a conference in Lisbon. “We would like to remain shareholders, but we’ll see.”

The bank has a 2 percent stake in Zon and owns 11.4 percent of Portugal Telecom, Zon’s larger competitor in the country’s telecommunications market. Espirito Santo, Portugal’s third- biggest bank by assets, plans to keep its holding in utility EDP-Energias de Portugal SA, Salgado said. That stake amounted to 2.1 percent in September, according to the power company’s website.

Espirito Santo sold international loans, its shares in Brazil’s Banco Bradesco SA and part of a stake in Denmark’s Saxo Bank A/S last year. Portugal’s financial crisis has made access to wholesale funding more difficult for banks based in the country. Portugal sought external aid in April, the third euro- region country to do so after Greece and Ireland.

Probable Sale

“We believe there is a strong likelihood of BES selling part or the entire stake,” said Pedro Pinto Oliveira, an analyst at Banco BPI SA, in a note today. “We see Isabel dos Santos, who currently owns 10 percent of the company, as the most likely buyer.” Kento Holding Ltd., controlled by dos Santos, bought a stake in the company in 2010.

Zon rose as much as 2.2 percent to 2.55 euros and was up 0.4 percent at 1:23 p.m. in Lisbon. The stock has gained 8.1 percent this year. Portugal Telecom increased 0.7 percent to 4.33 euros. Espirito Santo rose 2.1 percent to 1.29 euros.

As part of the aid plan, Portuguese lenders were required to raise Core Tier 1 capital ratios to 9 percent by the end of 2011 and 10 percent by the end of 2012. Espirito Santo had 5.38 billion euros ($6.8 billion) of Core Tier 1 capital at the end of the third quarter, giving it a ratio of 8.1 percent. The bank completed a capital increase Dec. 5, boosting Tier 1 capital by 622 million euros.

According to European Banking Authority rules, the banks also need a 9 percent capital ratio by the end of June, after marking their sovereign-debt holdings to market prices.

Share Gain

Zon’s gain this year is the third-biggest on Lisbon’s benchmark PSI-20 Index, behind Banco BPI SA and Galp Energia SGPS SA. Zon stock is still down 24 percent from 12 months ago.

Espirito Santo doesn’t intend to start selling shares in Zon “just because the price has increased,” Salgado said. “We are here to defend Zon, to help it develop partnerships that can move the company forward.”

The “M&A appeal” for Zon is growing, Nuno Matias, an analyst at Espirito Santo’s investment bank, said in a report sent by e-mail yesterday. “Consolidation makes sense,” he wrote, estimating savings of as much as 355 million euros from a merger of Zon and smaller competitor Sonaecom SGPS SA. Matias reiterated “buy” recommendations on the two telecommunications companies.

Zon CEO Rodrigo Costa, responding during a conference yesterday to a question about a possible combination with Sonaecom, said “we don’t spend time thinking about consolidations” during day-to-day operations. Sonaecom today declined to comment.

Shareholders of Zon, Portugal’s biggest cable-television provider, are scheduled to meet Jan. 30 to discuss ending a rule barring any investor from exercising more than 10 percent of the company’s voting rights.

Joao Pereira Coutinho, chairman of Grupo SGC, said in an e- mailed response that he hasn’t made a decision yet on whether to keep the company’s 2 percent stake in Zon.

“It’s probable that a fundamental change in Zon will take place in the near future,” he said. “The first step for that to happen is to end limits to voting rights.”

--With assistance by Henrique Almeida in Lisbon. Editors: Thomas Mulier, David Risser

To contact the reporter on this story: Anabela Reis in Lisbon at

To contact the editor responsible for this story: Angela Cullen at

Best LBO Ever
blog comments powered by Disqus