Telefonica SA’s share price down, bids 6.7 billion euros for Vivendi’s Brazil GVT unit

Telefonica SA, the second-largest phone carrier in Europe, offered to buy Vivendi SA’s Brazilian Internet-provider unit GVT for 6.7 billion euros (9 billion dollars), in a move to shore up its leadership in Latin Americas largest market.

The Spanish telecom giant made an official statement today, announcing that it offered Vivendi 11.96 billion reals (5.3 billion dollars) in cash. In addition, the bid to Vivendi includes providing it with the right to purchase approximately 8% stake in Telecom Italia SpA from Telefonica.

According to the companys statement, Telefonica intends to merge the GVT unit with its own Brazilian division called Vivo if the deal is finalized. Recently, Vivendi has intended selling its GVT unit, but suspended the sale after the division was found attractive by a variety of companies, which however, did not manage to meet the price of 7 billion euros required by Vivendi.

As reported by the Wall Street Journal, Vivendi SA commented that “none of its subsidiaries are for sale” but it would still examine the offer. The company also explained that it is currently following a strategy “to create an industrial group focused on the organic growth of its activities and to support them in their development.”

If the deal is finalized, it would provide the Spanish telecom giant with the opportunity to expand its reach in the largest economy in Latin America, but it will also facilitate Vivendi, which is seeking a way out from its legacy telecoms business.

One of the analysts, who work at Landesbank Baden-Wuerttemberg – Mr. Ralph Szymczak commented the offer for Bloomberg: “This is an absolutely sensible move from Telefonica. They’re trying to get out of Italy and would strengthen their Brazilian business through a merger with GVT.”

Telefonica SA was 2.17% down to trade at 11.73 euros per share by 13:50 GMT, valuing the company at 54.57 billion euros. The shares of Telefonica have returned investors 8.06% over the past twelve months. According to the information published on the Financial Times, the 30 analysts offering 12-month price targets for Telefonica SA have a median target of 12.25 euros, with a high estimate of 14.50 euros and a low estimate of 8.20 euros. The median estimate represents a 2.17% increase from the last price of 11.99 euros.