Vivendi SA shared in an official statement today that it agreed to sell its Brazilian broadband division GVT to Telefonica SA in a €7.24-billion ($9.3-billion) deal. The acquisition is made up of both cash and stakes in two other telecoms companies.
The acquisition was approved by Vivendis board, but it is still subject to approval by regulatory authorities in Brazil. Vivendi revealed that it expects the deal to be finalized within the first six months of 2015.
According to Vivendis statement, the company will receive €4.66 billion in cash, with about €450 million in bank debt and other obligations being deducted. The sale price also includes a 7.4% stake in the Brazilian operations of Telefonica, valued at €2.02 billion, and a 5.7% stake in Telecom Italia SpA, valued at €1.01 billion. The deal was said to be financed through a capital increase by Telefonicas Brazilian business and at the parent company.
The sale of GVT puts an end to a difficult two-year restructuring, during which the company disposed of three telecom units and its video games division in order to pay down debt, shifting focus toward its media and content businesses.
“The new Telefonica Brasil resulting from the integration will enhance its leadership as the country’s integrated telecommunications operator, leader in both the mobile and broadband segments, with national coverage and an increased exposure in the high-value segment,” Madrid-based Telefonica said in its statement. “The transaction allows Telefónica to enhance its positioning in one of its key markets and improve its growth profile and financial flexibility.”
The acquisition of Vivendis unit will provide Telefonica with the opportunity to increase its broadband market share in Brazil to about 30%. In comparison, America Movil holds about 32% of the market, and Oi SA has a 27% share.
Vivendi SA added 0.26% by 10:01 GMT in Paris to trade at €19.52 per share, marking a one year change of +12.31%. The company is valued at €26.26 billion. According to the Financial Times, the 20 analysts offering 12-month price targets for Vivendi SA have a median target of €21.00, with a high estimate of €27.00 and a low estimate of €17.00. The median estimate represents a 7.86% increase from the previous close of €19.47.
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