Telecoms group Altice SA (ATCE.AS) has agreed to buy the Portuguese operations of Brazil's Grupo Oi (OIBR3.SA) for about 7.4 billion euros ($9.2 billion), in what will be its third large acquisition this year.
Franco-Israeli billionaire entrepreneur Patrick Drahi, who founded Altice, has been on an expansion drive with deals worth some $30 billion this year alone, and is on track to add Portugal to his portfolio of cable and mobile companies in France, Israel, and the Dominican Republic.
For Oi, Brazil's largest fixed-line telephone provider, the divestment marks the effective unwinding of its ill-fated merger with Portugal Telecom (PTC.LS), which hit the rocks earlier this year when the Portuguese side lost hundreds of millions of euros in the country's Espirito Santo banking scandal.
Shares in Altice jumped more than 5 percent to 56.87 euros in morning trade as investors cheered the acquisition even though Altice had to slightly raise its offer to see off a competing bid from private equity funds Apax [APAX.UL] and Bain.
ING analyst Emmanuel Carlier estimated that the Portugal deal would add about 9 euros per share to Altice's valuation.
"Altice announces that it has entered into an exclusivity agreement with Oi to agree the purchase of the Portuguese assets of Portugal Telecom," the company said in a statement.
Altice was advised by Morgan Stanley (MS.N) and Perella Weinberg on the deal. Oi was advised by BTG Pactual (BPAC3.SA).
The two sides will spend three weeks to finalise the acquisition and complete due diligence.
Altice's offer valued Portugal Telecom at 7.4 billion euros on a cash and debt-free basis, and included 500 million euros in additional payments related to the future revenue generation of Portugal Telecom.
Altice completed its biggest acquisition ever last Thursday when subsidiary French cable company Numericable (NUME.PA) bought mobile operator SFR.
Its acquisition spree this year has been fueled largely by debt, and Altice plans to pay for Portugal Telecom in existing cash and debt. Morgan Stanley, Goldman Sachs, JP Morgan, Credit Suisse, and Deutsche Bank have agreed to back the Portugal bid.
In Portugal, where Altice owned two small cable companies, buying the former state-owned monopoly Portugal Telecom (PTC.LS) would vault Altice into prime position to compete with Vodafone (VOD.L) and Optimus (MLOPT.PA).
PT Portugal holds 52 percent in broadband and 41.5 percent of the mobile market in terms of revenue, according to Citigroup. Rivals Vodafone and Nos (NOS.LS) have 41.6 percent and 16.9 percent respectively.
The sale of Oi's Portuguese assets could also touch off long-mooted mobile consolidation inBrazil.
Oi has been working on a plan to team up with rivals in its domestic market to buy and then break up TIM Participacoes SA (TIMP3.SA), the nation's No 2 wireless carrier.
But Oi needed to dispose of some assets to lower its debt burden, currently at about 46 billion reais, as it tries to avoid breaching covenants with bondholders early next year.
A source with direct knowledge of the situation told Reuters last month that Oi, Telefonica (TEF.MC) and America Movil (AMXL.MX) will place a bid worth 32 billion reais for TIM, which is 67 percent controlled by Telecom Italia (TLIT.MI), and then seek to split it among them.
The bid could be presented within days after the Portugal Telecom deal is confirmed, analysts and bankers said.
Join the Conversation