Telefonica SA’s share price down, to enter exclusive talks with Vivendi SA over GVT purchase

Telefonica SA, the world’s sixth-largest mobile network provider, said that Vivendi had elected to begin exclusive talks with the company over Telefonicas $9.8bn bid to acquire GVT, Vivendis Brazilian arm.

The mostly-cash acquisition bid of Telefonica was favored by Vivendi over Telecom Italias offer of “relevance and quality.”

Vivendi SA described the offer of Telefonica as “particularly attractive” as it is expected to generate a capital gain of more than €3 billion (~$4bn). Telefonica SA increased its initial offer by 11% to €7.45bn, including €4.66bn in cash.

“The other conditions of the offer, limiting to a strict minimum the risk of executing the operation as well as Vivendi’s commitments after the sale, are totally in line with Vivendi’s objectives,” the French carrier said.

Telefonica SA revealed that it expects the eventual merger of GVT and its own Brazilian unit to generate at least €4.7bn in synergies thanks to lower operating and network expenses. The company also said that tax savings and smaller financial costs are also expected.

Mr. Norbert Janisch, who is a fund manager at Raiffeisen Capital commented for Bloomberg: “GVT has a high strategic relevance for Telefonica – it’s a must have.”

Vivendi would also benefit from the eventual sale of its GVT unit. The company is to proceed with the reduction of its phone assets portfolio. More than $30 billion of asset disposals have been announced by Vivendi since 2013, as the company is trying to shift its focus towards media.

Telefonica SA lost 0.50% to trade at €12.03 per share by 12:28 GMT, marking a one year change of +15.12%. The company is valued at €55.02 billion. According to the Financial Times, the 29 analysts offering 12-month price targets for Tepefonica SA have a median target of €12.50, with a high estimate of €14.50 and a low estimate of €8.20. The median estimate represents a €3.39% increase from the last price of €12.09.