Bloomberg News

Zon Gains After Ending Limits to Voting Rights: Lisbon Mover

February 01, 2012

Jan. 30 (Bloomberg) -- Zon Multimedia SGPS SA, Portugal’s biggest cable-television provider, rose as much as 2.5 percent after eliminating a limit on voting rights.

Zon rose as much as 6 cents to 2.61 euros and traded 1.4 percent higher at 1:27 p.m. in Lisbon. The gain was the biggest today on Portugal’s benchmark PSI-20 Index, which fell 1.4 percent. Zon has added 12 percent this year, for a market value of 801 million euros ($1.05 billion).

A majority of shareholders voted to end the prohibition on any investor exercising more than 10 percent of voting rights. Banks Caixa Geral de Depositos SA and Banco Espirito Santo SA, which Zon says own 10.9 percent and 2 percent respectively, are being pressed to sell assets to raise capital ratios under Portugal’s bailout program. State-owned Caixa should sell all non-core assets, according to the plan.

“A shareholder exchange” and a combination of Zon and another telecommunications company “would make sense,” Paul Marsch, an analyst at Berenberg Bank in London, said Jan. 27. Zon investors “may be impatient for the payoff” after extensive network investment ended last year, said Marsch, who has a “hold” recommendation on the stock.

Kento Holding Ltd., controlled by Isabel dos Santos, daughter of Angola’s president, owns 10 percent of Zon, and is the most likely buyer of additional shares, Marsch said. Acquiring the banks’ stakes would leave Kento well placed to combine Zon with another company, he said.

Sonaecom Contacts

Sonaecom SGPS SA, which controls Portugal’s smallest mobile-phone operator, has been seen as a possible suitor in local press reports since the company acknowledged “contacts” with Zon in 2009. Sonaecom, based near the city of Oporto, declined to comment about any merger plans.

Sonaecom dropped 0.8 percent to 1.25 euros, paring the advance to 2.5 percent this year and giving the company a market value of 456 million euros.

Angolan companies and investors have been increasing their stakes in companies in Portugal, which last year became the third euro-region country to request a bailout from the European Union and the International Monetary Fund.

Spain’s Telefonica SA, which owns 5.5 percent of Zon, may also sell its holding, Marsch said. The Madrid-based phone company, Europe’s largest by market value, said in November that it was looking to divest underperforming assets and operations outside its main businesses to reduce debt. A Telefonica spokesman declined to comment today.

‘Consolidation Makes Sense’

“Consolidation makes sense,” said Nuno Matias, an analyst at Espirito Santo’s investment bank. He estimated savings of as much as 355 million euros from a merger of Zon and Sonaecom, and has “buy” recommendations on the stocks.

Zon was spun off from Portugal Telecom following Sonaecom’s failed bid for the former national phone-operating monopoly. Investors in Portugal Telecom received Zon shares.

Joaquim Oliveira, a Portuguese investor and the chairman of Controlinveste SGPS SA who owns 4.8 percent of Zon, told reporters today after the meeting that it’s too early to say what he’ll do with the stake. Asked about the possibility of a merger, he declined to comment.

Joao Pereira Coutinho, chairman of Grupo SGC, said in an e- mailed response on Jan. 13 that he hadn’t made a decision yet on whether to keep the company’s 2 percent stake in Zon.

‘Fundamental Change’ Probable

“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.”

Zon Chief Executive Officer Rodrigo Costa said on Jan. 12 that “we don’t spend time thinking about consolidations” during day-to-day operations. Chairman Daniel Proenca de Carvalho declined to comment today on merger plans or shareholder exchanges.

Espirito Santo Irmaos SGPS SA owns 5 percent of Zon and as of Dec. 31 also had 10 percent of Espirito Santo Financial Group SA, which in turn controls Banco Espirito Santo. Espirito Santo Irmaos and Caixa asked for the meeting to change voting rights.

Banco Espirito Santo CEO Ricardo Salgado said on Jan. 12 that the company’s stake in Zon was “less strategic” than others held by the bank.

--With assistance from Manuel Baigorri in Madrid . Editors: Tom Lavell, David Risser

To contact the reporter on this story: Anabela Reis in Lisbon at areis1@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net


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