French entertainment and telecoms group Vivendi said on Tuesday that it will offer to buy Brazilian broadband and telecoms supplier GVT for around 5.4 billion Brazilian reais ($3 billion). According to Vivendy, its signed agreements with Swarth Group and Global Village Telecom, the founding and controlling shareholders of GVT, which will tender at least 20% of the outstanding shares out of the 30% they currently own.
The French media firm said the offer will be conditional on receiving support from GVT's board and on shareholders agreeing to waive the anti-takeover mechanism in the company's by-laws. "This agreement with GVT meets a strategic objective for Vivendi to expand in fast growing economies," said Vivendi CEO Jean-Bernard Levy, MarketWatch reports.
News agencies also report, Swarth Group and Global Village Telecom could not immediately be reached for comment. A GVT spokeswoman declined to comment on the offer.
The offer is Vivendi's latest major move into emerging markets. In July it ended talks to buy a majority stake in the African telecoms unit of Kuwaiti telecoms company Zain (ZAIN.KW).
Barclays Capital analyst Michel Morin wrote in a note on Tuesday GVT's assets were "strategically attractive" for companies looking to expand in Brazil, one of the fastest growing emerging markets.
GVT is the leading alternative telecom provider in Brazil with 2.3 million lines in service in 81 of Brazil's largest cities. It had revenues of about $800 million and $300 million of adjusted operating profit last year, Reuters reports.
The Wall Street Journal quoted Shaul Shani, Chairman of GVT and the controlling shareholder of the Swarth Group as saying, "We will work closely with Vivendi to boost the company's broadband value proposition with substantial additional content enhancement."
The bid shows "Vivendi is looking for new growth opportunities as the SFR business unit is expected to slow down," Aurel analyst Arnaud-Cyprien Nana Mvogo said in a research note, adding that Vivendi's offer represents a 15.83% premium to GVT's last closing price of BRL36.26.
GVT in July reported a rise in second-quarter net profit to BRL70.3 million from BRL57.3 million in the year ago period as revenues rose. The operator had a total of 2.3 million lines in service at the end of June.
The move towards Brazil comes two months after Vivendi halted talks with Zain to acquire a majority stake in its African telecommunications activities.
CEO Levy confirmed at the group's first-half results last week that Vivendi was still looking for opportunities in emerging markets and would consider small to medium-sized acquisitions to enlarge its geographical footprint in such regions.
The group would compete in Brazil with Portugal Telecom (PT) and Telefonica SA's (TEF) Vivo Participacoes SA (VIV) and Telecom Italia's (TI) TIM Participacoes SA (TSU).
The French media giant will need the support of GVT's management board and shareholders who will have to vote to waiver the anti-takeover mechanism in GVT's by-laws.
GVT's controlling shareholders already agreed to vote in favor of the waiver, according to Vivendi.
At 0721 GMT, Vivendi's shares were trading down 1.2% to EUR19.78, while the CAC was down 0.2%. The stock has lost about 15% since the start of the year due to uncertainties over the group's acquisition strategy, The Wall Street Journal reports