Battle Royale: Portugal’s government blocks PT Vivo sale to Telefonica

1 Jul 2010

The government of Portugal yesterday added its heavyweight presence to the ongoing saga of Portugal Telecom (PT) and Telefonica of Spain’s battle for control of the Brazilian mobile joint venture Vivo Participacoes. In a surprise move, Lisbon used its controversial ‘golden share’ in PT to veto an improved EUR7.15 billion (USD8.73 billion) bid put forward by the Spanish firm to buy out its partner. Dow Jones Newswires notes that the government’s intervention could set it on collision course with European Union (EU) authorities which consider Portugal’s golden share option breaches the principle of the free movement of capital. Indeed, the veto comes just a week before the European Court of Justice is expected to hand down its decision on the legality of the state’s golden share in its national PTO, which was set up originally to prevent a hostile takeover.

The Prime Minister of Portugal, Jose Socrates, justified the move by saying the country’s strategic interests would be jeopardised if PT pulled out of Vivo and that the state has a duty to protect the size and market value of what is its largest company by market value. ‘The offer was not in the interest of PT,’ Socrates said. ‘The government is protecting the interests of the country.’ It is understood that around 74% of PT shareholders voted in favour of Telefonica’s improved bid for its 50% stake in the Brazilian venture. For its part, Telefonica declined to comment on the government’s surprise move, saying only that it will have to study the decision before deciding its course forward.

Brazil, PT Portugal (MEO), Telefonica