Telefonica pays first instalment in Vivo deal, will launch further share tender offer

29 Sep 2010

Spanish telecoms giant Telefonica has paid a first instalment of EUR4.5 billion (USD6.1 billion) in a EUR7.5 billion deal to buy the 50% it does not already own in Brasilcel, its joint holding vehicle with Portugal Telecom (PT) and the holder of a 63.6% share of Brazilian cellco Vivo. As part of the agreement with PT signed in late July, Telefonica paid the first tranche of EUR4.5 billion for the Brasilcel stake acquisition, whilst the remaining instalments will be paid on 30 December 2010 (EUR1 billion), followed by EUR2 billion on 31 October 2011 (or 29 July 2011 at PT’s request). Further, Telefonica has disclosed that it will launch a tender offer for the remaining voting shares of Vivo, for a price equal to 80% of that paid by the Spanish group for each voting share of Vivo owned by Brasilcel. 36.1% of Vivo’s shares are in free float and 0.3% are Treasury shares.

Earlier this week Telefonica’s takeover of Vivo gained approval from Brazilian regulator Anatel, with certain conditions related to 3G network rollout. Further conditions may be added by Brazil’s Administrative Council on Economic Defense, a body that guarantees market competition.

The news that money has changed hands between Telefonica and PT is in line with the pair’s agreement dated 28 July which stated the closing of the acquisition transaction would occur within 60 days of signing. On closing of the deal, agreements entered into by Telefonica and PT in 2002 regarding their joint venture in Brazil are now effectively terminated, including their ‘shareholders agreement’ and ‘subscription agreement’.

Brazil, PT Portugal (MEO), Telefonica