Telefonica SA raised its offer for Vivendi SA’s GVT unit to 7.45 billion euros ($9.8 billion), escalating a takeover battle with Telecom Italia SpA for one of Brazil’s fastest-growing broadband providers.
Telefonica’s proposal, 11 percent more than a previous one it made on Aug. 5, includes 4.66 billion euros in cash, the Madrid-based carrier said today. Minutes before, Milan-based Telecom Italia announced a 7 billion-euro offer consisting of stock and about 1.7 billion euros of cash. Both companies want to combine GVT with their own Brazilian mobile-phone units.
If Vivendi, whose board meets today to discuss the bids, agrees to sell GVT, the winner would be able to expand its mobile and landline offers in Brazil. While Telefonica is offering more cash, Telecom Italia’s proposal focuses more on a partnership that would include the Italian carrier distributing content from Vivendi’s media assets, which include Canal Plus.
Telefonica’s offer expires tomorrow, and Telecom Italia’s is valid through Sept. 20. In a statement, Vivendi said it will examine the two bids at today’s board meeting. The company beat Telefonica in 2009 to take over GVT for $4.18 billion.
“The ultimatum included in Telefonica’s last raised offer has the characteristics of a real revenge against an ex-lover,” said Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University. “This battle will be won by the party who is able to offer Vivendi the best industrial synergies, since cash is not the key point.”
Telefonica’s bid would give Vivendi a 12 percent stake in the entity from a merger of Telefonica Brasil SA with GVT. The cash portion would come from a share sale by Telefonica Brasil, Telefonica said. Telefonica SA also plans a capital increase to help finance the deal, a Madrid-based representative said.
In Telecom Italia’s proposal to combine its Tim Brasil unit with GVT, Vivendi would get a stake of about 20 percent in Telecom Italia and 15 percent in the enlarged Brazilian carrier. The cash payment will come from a capital increase by Tim, which is 67 percent owned by Telecom Italia. Telecom Italia shareholder Findim Group SA said it supports the bid.
Shares of Telecom Italia fell 0.8 percent to 85.6 cents at 12:55 p.m. in Milan. Telefonica slid 0.7 percent to 12.05 euros in Madrid. Vivendi, which reports earnings after market close today, declined 0.9 percent to 20.02 euros in Paris.
Telecom Italia is proposing a global partnership to Vivendi as consumers increasingly access media content on mobile phones and tablets and via the Internet. Paris-based Vivendi produces television content through the Canal Plus pay-TV business, and owns music rights through its Universal Music Group unit.
Talks between Telecom Italia Chief Executive Officer Marco Patuano and Vivendi Chairman Vincent Bollore had already taken place before Telefonica made its initial bid for GVT on Aug. 5, people familiar with the matter have said.
Billionaire Bollore has had long-running ties to Italy. The 62-year-old Frenchman heads France’s Bollore Group, a stakeholder in bank Mediobanca SpA, which in turn is one of the four partners in Telecom Italia’s largest investor group Telco.
If Vivendi chooses Telefonica, it would continue on a path of reducing its exposure to phone properties. It has announced more than $30 billion of asset sales since last year, including the disposal of French mobile carrier SFR, to focus on media.
“Telefonica is offering more in cash and total value, however Vivendi is cash-rich and searching now for attractive reinvestment opportunities,” Stephane Beyazian, an analyst at Raymond James in London, said in a note. “We don’t completely rule out that management could be interested in a merger of both strongly performing assets TIM Brasil and GVT.”
Analysts at Kepler Cheuvreux said Vivendi probably prefers Telefonica’s offer because of the higher value and cash payment.
Telefonica would boost its Brazil broadband market share to about 30 percent by buying GVT, allowing it to challenge America Movil SAB, which has 32 percent. Oi SA is now the No. 2 with 27 percent. Tim has less than 1 percent of the market.
Telefonica’s wireless market share is 29 percent, compared with Tim’s 27 percent. Claro, owned by Carlos Slim’s America Movil, has 25 percent and Oi 19 percent.
Citigroup Inc., Mediobanca and BNP Paribas SA are advising Telecom Italia and Banco Bradesco SA is advising Tim. Goldman Sachs Group Inc. and Credit Suisse Group AG are advising Vivendi and JPMorgan Chase & Co. is assisting Telefonica.
The race to buy GVT is the latest twist in a spat between Telecom Italia and its shareholder Telefonica over the future of Tim. While Patuano is in favor of keeping Tim and expanding it through a merger with GVT, Telefonica had explored a plan to break up Tim and then split it among other operators, including Telefonica, people familiar with the matter said in May.
Other Brazilian carriers are also pursuing combinations as intense competition weighs on call and data prices. Oi is looking for partners to make a joint bid for Tim and is only interested in taking a portion of its rival’s assets, people have said. Oi’s adviser Banco BTG Pactual SA is trying to get Telefonica and America Movil to team up with Oi to buy Tim and then break it up, people said.
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