Telecom Italia minorities to support potential GVT counter-bid
Telecom Italia’s (TI) [BIT:TIT] minority shareholders association, ASATI, is supporting the Italian incumbent’s potential counter-bid for Global Village Telecom (GVT), its president, Franco Lombardi, told Dealreporter.
ASATI is counting on TI activist shareholder Marco Fossati, who owns a 5% stake in the company, to support the counter-bid. The association controlled around 1% of the ordinary shares in TI as of 31 December 2013.
According to Lombardi, ASATI proposed TI’s board mandate CEO Marco Patuano to evaluate a potential merger with GVT. A TI board meeting was held this afternoon to approve the 1H14 results.
ASATI spoke against a possible sale of TIM Brasil [BVMF:TIMP3] in the past.
On 4 August, Vivendi [EPA:VIV] said it received a binding offer from Telefonica [BME:TEF] and its subsidiary Telefonica Brasil to acquire its Brazilian subsidiary, GVT, for a total enterprise value of BRL 20.1bn (approximately EUR 6.7bn). Approximately 60% of the deal would be payable in cash while the remaining amount would be funded with Vivo shares (12% of the future combined entity).
A person close to Vivendi described Telefonica’s offer as “unsolicited,” adding that the two parties did not hold talks prior to today’s announcement.
Acquiring GVT would be a defensive move on TI’s part to guard its presence in the Brazilian market, where TIM Brasil could be subject to takeover attempts as a standalone entity, a sector banker following the situation said.
Lombardi estimated that TI would need to raise around EUR 3bn to finance the cash component of a potential GVT bid. “A rights issue would be very welcomed [by TI shareholders],” he added.
Shareholders of TI would be more willing to support an increase in capital if it were aimed at financing M&A activities, the first sector banker and a second sector banker following the situation said.
“It is hard to convince shareholders to take part in a rights issue when all you are aiming for is deleveraging and boosting investments”, the first banker said. But by linking it to a counter-bid for GVT the scenario changes drastically, he noted.
In this context, the proceeds of a cash call could be used to partially finance the offer for Vivendi’s subsidiary, while the rest could be used for deleveraging and investments, said the first sector banker.
Telefonica management has proven its ability to integrate broadband and mobile assets, said the second banker. Should it win GVT, the deal would give Telefonica an opportunity to use these skills, he noted. But on the other hand, TIM Brasil would be left as a mobile operator with little opportunities to expand, he said, noting the Brazilian enterprise could find itself in a difficult position.
If the merger between GVT and Telefonica Brasil completes successfully, Vivendi would have the opportunity to acquire 8.3% of Telecom Italia from Telefonica.
Vivendi said it would evaluate Telefonica’s offer at its next supervisory board meeting. Vivendi has until 3 September to reply to Telefonica’s proposal.