Takeover battle underway for Portugal Telecom

LISBON – One of Europe’s biggest takeover battles kicks off today in Portugal when Sonaecom’s 10,7-billion-euro hostile bid for its larger rival Portugal Telecom gets underway.

Sonaecom unveiled its offer of 9,50 euros per share for what is the nation’s biggest listed company in a surprise move last February but Portugal’s stock market regulator only gave the bid its approval on Friday. The bid, Portugal’s largest-ever hostile takeover, will run until March 9, the regulator said in a statement after the market had closed.The offer is contingent on Sonaecom, the listed subsidiary of Portuguese conglomerate Sonae which is controlled by Portugal’s richest man, Belmiro de Azevedo, obtaining at least 50,01 per cent of Portugal Telecom.Sonaecom also needs to convince a majority of Portugal Telecom shareholders to change a company statute that forbids a single shareholder from holding more than 10 per cent of the firm’s voting rights.Portugal Telecom, a former state monopoly that was fully privatised in 2000, has urged its shareholders to reject the offer, which it argues undervalues the company and would hurt consumers by creating a high level of concentration.The firm’s chief executive Henrique Granadeiro called Sonaecom’s offer “unacceptable” and “unquestionably low”.Shares in PT closed at 10,20 euros on Friday, a gain of 0,69 per cent.”The premium offered by Sonaecom to gain control of the biggest and most prestigious Portuguese firm, Portugal Telecom, is zero.The offer does not reflect the fair price of the company,” he told a news conference.Portugal Telecom has promised to pay shareholders more than 3,5 billion euros in dividends by the end of 2008 and sell its listed cable television unit PT Multimedia if the bid is rejected.The firm’s biggest shareholders include Spain’s Telefonica with 9,96 per cent, Portuguese bank Banco Espirito Santo with 8,08 per cent and US Fund Brandes Investments Partners with 7,67 per cent.Most analysts believe Sonaecom, in which France Telecom has a 20 per cent stake, will have to raise its offer for it to succeed.”Sonaecom has room to improve the price offered for Portugal Telecom if you take into account the synergies that would result from the merger of (their two mobile units) TMN and Optimus and the possibility of gains from asset sales,” said telecoms analyst Teresa Marinho of Portuguese bank Banif.Sonaecom could raise its offer to up to 10,80 euros per share, she said.Investment bank Credit Suisse meanwhile said on Thursday that Sonaecom would have to raise its offer to 11 euros per share.Sonaecom has repeatedly said it will not raise it offer for Portugal Telecom, which it argues has lost value over the past year due to its falling market share at home and in Brazil where it is active in the mobile market.The company is also offering 9,03 euros per share of PT Multimedia, in which Portugal Telecom controls a 58 per cent stake.Portugal Telecom and its cable unit has about 75 per cent of the nation’s fixed-line telephone market, 80 per cent of the broadband cable market and, through TMN, about half of the mobile phone market, according to company figures.It also runs Brazilian mobile services operator Vivo in a joint venture with Telefonica.Sonaecom controls Optimus, Portugal’s third-biggest mobile phone provider and has set up its own fixed-line network, mainly to provide Internet services.Last month Portugal’s competition authority cleared Sonaecom’s takeover bid but said if it is successful the firm would have to sell either the fixed-line telephone network or cable network belonging to Portugal Telecom.Sonaecom would also have to give up one of the two mobile licences it would own if the bid succeeds, the authority said.Nampa-AFPThe bid, Portugal’s largest-ever hostile takeover, will run until March 9, the regulator said in a statement after the market had closed.The offer is contingent on Sonaecom, the listed subsidiary of Portuguese conglomerate Sonae which is controlled by Portugal’s richest man, Belmiro de Azevedo, obtaining at least 50,01 per cent of Portugal Telecom.Sonaecom also needs to convince a majority of Portugal Telecom shareholders to change a company statute that forbids a single shareholder from holding more than 10 per cent of the firm’s voting rights.Portugal Telecom, a former state monopoly that was fully privatised in 2000, has urged its shareholders to reject the offer, which it argues undervalues the company and would hurt consumers by creating a high level of concentration.The firm’s chief executive Henrique Granadeiro called Sonaecom’s offer “unacceptable” and “unquestionably low”.Shares in PT closed at 10,20 euros on Friday, a gain of 0,69 per cent.”The premium offered by Sonaecom to gain control of the biggest and most prestigious Portuguese firm, Portugal Telecom, is zero.The offer does not reflect the fair price of the company,” he told a news conference.Portugal Telecom has promised to pay shareholders more than 3,5 billion euros in dividends by the end of 2008 and sell its listed cable television unit PT Multimedia if the bid is rejected.The firm’s biggest shareholders include Spain’s Telefonica with 9,96 per cent, Portuguese bank Banco Espirito Santo with 8,08 per cent and US Fund Brandes Investments Partners with 7,67 per cent.Most analysts believe Sonaecom, in which France Telecom has a 20 per cent stake, will have to raise its offer for it to succeed.”Sonaecom has room to improve the price offered for Portugal Telecom if you take into account the synergies that would result from the merger of (their two mobile units) TMN and Optimus and the possibility of gains from asset sales,” said telecoms analyst Teresa Marinho of Portuguese bank Banif.Sonaecom could raise its offer to up to 10,80 euros per share, she said.Investment bank Credit Suisse meanwhile said on Thursday that Sonaecom would have to raise its offer to 11 euros per share.Sonaecom has repeatedly said it will not raise it offer for Portugal Telecom, which it argues has lost value over the past year due to its falling market share at home and in Brazil where it is active in the mobile market.The company is also offering 9,03 euros per share of PT Multimedia, in which Portugal Telecom controls a 58 per cent stake.Portugal Telecom and its cable unit has about 75 per cent of the nation’s fixed-line telephone market, 80 per cent of the broadband cable market and, through TMN, about half of the mobile phone market, according to company figures.It also runs Brazilian mobile services operator Vivo in a joint venture with Telefonica.Sonaecom controls Optimus, Portugal’s third-biggest mobile phone provider and has set up its own fixed-line network, mainly to provide Internet services.Last month Portugal’s competition authority cleared Sonaecom’s takeover bid but said if it is successful the firm would have to sell either the fixed-line telephone network or cable network belonging to Portugal Telecom.Sonaecom would also have to give up one of the two mobile licences it would own if the bid succeeds, the authority said.Nampa-AFP