(Adds further details, length of exclusivity period)
By Leila Abboud and Guillermo Parra-Bernal
PARIS/SAO PAULO, Dec 1 (Reuters) - Telecoms group Altice SA has agreed to buy the Portuguese operations of Brazil’s Grupo Oi for about 7.4 billion euros ($9.2 billion), in what will be its third big acquisition this year.
Altice’s founder, Franco-Israeli telecoms entrepreneur Patrick Drahi, has been on an expansion drive with deals this year worth some $30 billion, and is on track to add Portugal to his portfolio of cable and mobile telecoms companies in France, Israel, and the Dominican Republic.
For Oi, Brazil’s largest fixed-line telephone provider, the sale marks the effective unwinding of its ill-fated merger with Portugal Telecom, which hit the rocks earlier this year when the Portuguese side lost hundreds of millions of euros in the country’s Espirito Santo banking scandal.
Shares in Altice jumped more than 6 percent to 57.50 euros in morning trade as investors welcomed the deal, even though Altice had to raise the value of its original offer by 375 million euros to see off a competing bid from private equity funds Apax Partners and Bain Capital.
ING analyst Emmanuel Carlier estimated that the Portugal deal would add about 9 euros per share to Altice’s valuation.
“Altice announces that it has entered into an exclusivity agreement with Oi to agree the purchase of the Portuguese assets of Portugal Telecom,” the company said in a statement.
The two sides will now work to finalise the acquisition and complete due diligence during what Oi’s statement said was a 90-day exclusivity period.
Altice was advised by Morgan Stanley and Perella Weinberg on the deal. Oi was advised by BTG Pactual.
Altice’s offer valued Portugal Telecom at 7.4 billion euros on a cash and debt-free basis, and included 500 million euros in additional payments related to future revenue generation of Portugal Telecom.
The bid excludes Portugal Telecom’s investment in Africatel, the company’s debt, and a controversial loan made to the Rioforte holding company of the Espirito Santo banking family.
Altice completed its biggest acquisition ever last Thursday when subsidiary, French cable company Numericable, bought mobile operator SFR.
Its series of acquisitions this year has been fuelled largely by debt, and Altice plans to pay for Portugal Telecom in existing cash and debt. Morgan Stanley, Goldman Sachs, JP Morgan, Credit Suisse, and Deutsche Bank have agreed to back the Portugal bid.
In Portugal, where Altice owns two small cable companies, buying the former state-owned monopoly PT Portugal would vault Altice into prime position to compete with Vodafone and NOS.
PT Portugal holds 52 percent in broadband and 41.5 percent of the mobile market in terms of revenue, according to Citigroup. Rivals Vodafone and Nos have 41.6 percent and 16.9 percent respectively.
Completion of the sale of Oi’s PT Portugal business could also open the way to the next round of telecoms industry consolidation in Brazil.
Oi has been working on a plan to team up with rivals in its domestic mobile market to buy and then break up TIM Participacoes SA, Brazil’s second biggest mobile network operator.
But Oi needs to sell assets to reduce its debt of about 46 billion reais as it tries to avoid breaching covenants with bondholders early next year.
A source with direct knowledge of the situation told Reuters last month that TIM’s three rivals -- Oi, Telefonica Brasil and America Movil -- are preparing to place a bid worth 32 billion reais for TIM, which is 67 percent-owned by Telecom Italia, and then seek to split it among them.
The bid could be presented within days after the Portugal Telecom deal is confirmed, analysts and bankers said. ($1 = 0.8019 euros) (Additional reporting by Alexandre Boksenbaum-Granier; Editing by Susan Thomas and Greg Mahlich)