28 de agosto de 2014 / 11:54 / hace 3 años

BREAKINGVIEWS-Telefonica may have to inch higher for GVT

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Fiona Maharg-Bravo

MADRID, Aug 28 (Reuters Breakingviews) - Telefonica is showing how much it wants to buy GVT. The Spanish telecoms group has given Vivendi a 24-hour deadline to accept a new 7.45 billion euro ($9.8 billion) offer for the French conglomerate's Brazilian subsidiary. A competing bid from Telecom Italia is 450 million euros lower, has less cash and is more conditional. Still, Vivendi could yet wring more out of this auction.

The Spanish GVT proposal immediately looks more attractive. It comprises 4.7 billion euros of cash plus a stake in its Telefonica Brazil subsidiary worth 2.8 billion euros. About a third of those shares could be exchanged for a 5.7 percent stake in Telecom Italia, in which Telefonica has been a longstanding shareholder.

On standard M&A thinking, Telecom Italia's fiddly bid has much against it. The proposal has just 1.7 billion euros of cash. The remaining considering consists of a 15 percent stake in TI's Brazilian unit, TIM Brasil, and a 16 percent stake in Telecom Italia. Unlike Telefonica's, the offer requires a shareholder vote. To complicate matters further, TIM Brasil is also in play - Oi, Brazil's biggest fixed-line company, says it is considering buying TI's stake.

Vivendi says both offers include content deals. Details are scant, but that probably favours Telefonica, which has a larger global footprint than its Italian rival. The best that can be said for Telecom Italia's proposal is that it offers a large stake in itself, possibly positioning Vivendi nicely for future European telecoms consolidation.

Still, Vivendi would be unwise to rush off with Telefonica. Telecom Italia could still sweeten its bid with more of its own stock. Both sides seem to acknowledge that Telecom Italia shares are seen as an attractive currency by Vivendi Chairman Vincent Bollore. A revised Telecom Italia bid could in turn force a counterbid from its Spanish peer.

How much higher could Telefonica go? GVT is worth 5.2 billion euros on a standalone basis, equivalent to 7.5 times this year's EBITDA, say analysts at Kepler Cheuvreux. Telefonica could reap synergies with a present value of about 3.5 billion euros, although that includes a more elusive 1 billion euros of added revenue from cross-selling. On that basis, Telefonica could raise by another 1.2 billion euros without destroying value. It may yet have to pay some of that away to get what it wants.

CONTEXT NEWS

- Vivendi, the French media and communications group, said it received competing bids for its GVT Brazilian broadband business from Telecom Italia and Spain's Telefonica.

- Its supervisory board will examine the offers at a meeting on Aug. 28.

- Telecom Italia's offer ascribes GVT at an enterprise value of 7 billion euros ($9.24 billion) and comprises 1.7 billion euros of cash, a 16 percent stake in Telecom Italia (with 21.7 percent voting rights), and 15 percent of TIM Brasil, Vivendi said in a statement. It expires on Sept. 10 and is subject to approval by Telecom Italia shareholders.

- Telefonica raised its existing cash and stock offer for GVT from 6.7 billion euros to 7.45 billion euros. It includes 4.663 billion euros in cash, a 12 percent stake in Telefonica Brasil, of which about a third can be exchanged for 5.7 percent of the share capital of Telecom Italia and 8.3 percent of the voting rights. The offer expires on Aug. 29.

- The offers came after Oi, Brazil's biggest fixed-line company, said it had hired investment bank BTG Pactual to review options to buy Telecom Italia's stake in its Brazilian unit TIM Brasil.

- Vivendi statement bit.ly/1tNxCPS

- Reuters: Telecom Italia, Telefonica in bidding war for Vivendi's GVT

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(Editing by Chris Hughes and Sarah Bailey)

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