Oi Agrees to Sell Portugal Assets to Drahi for 7.4 Billion Euros

Oi SA (OIBR4) agreed to sell its Portuguese assets to billionaire Patrick Drahi’s Altice SA (ATC) for 7.4 billion euros ($9.1 billion), unraveling a merger to create a trans-Atlantic telecommunications carrier.
The deal includes a consideration of 500 million euros related to Portugal Telecom’s future revenue, according to a filing today. The price Drahi’s cable company is paying will be adjusted when the transaction is completed, the companies said.
The acquisition is the second multi-billion-dollar deal this year for Drahi, after the Franco-Israeli businessman also agreed to buy French wireless carrier SFR for about $23 billion. For Rio de Janeiro-based Oi, the sale will give it proceeds to use to pare its debt and to take part in consolidating Brazil, South America’s largest telecommunications market.
The companies began exclusive talks on Dec. 1 after Altice raised its offer, topping a rival bid by Apax Partners LLP and Bain Capital. Oi’s board approved the deal at a meeting last week, Bloomberg News reported last week, citing people familiar with the matter.
Oi and Portugal Telecom agreed a year ago on the combination to create a carrier with 100 million customers to compete against Telefonica SA and Carlos Slim’s America Movil SAB. In July, the companies renegotiated the transaction to give Portugal Telecom a smaller stake in the combined entity after it emerged that the Lisbon-based partner was holding debt defaulted on by Rioforte Investments SA, a unit of Grupo Espirito Santo. Oi Chief Executive Officer Zeinal Bava, who drove the merger, stepped down in October.
Luxembourg-based Altice has said that its offer doesn’t include the 897 million euros in short-term debt that Rioforte defaulted on.

Potential Complication

A potential complication to Altice’s offer is a deal sought by Isabel dos Santos, the daughter of Angola’s president and Africa’s richest woman. Last month, she made a 1.2 billion-euro bid for Portugal Telecom SGPS SA, the holding company whose main asset is a minority stake in the carrier created by the Oi and Portugal Telecom merger.
Portugal Telecom SGPS has veto rights over a sale of Oi’s Portuguese assets, people familiar with the matter have said. Portugal Telecom SGPS plans to convene a shareholder meeting to let investors decide on the approval of the sale, a spokeswoman for the holding said by telephone.
If Oi sells the Portuguese operating assets it is “very probable” that dos Santos will drop the bid for Portugal Telecom SGPS, Mario Silva, a board member of one of dos Santos’s companies, told reporters this month in Lisbon.
The Portuguese phone assets will add to Altice’s cable units Cabovisao and Oni in the country.

Drahi’s Wealth

Drahi, 51, has a net worth of $11.3 billion, according to the Bloomberg Billionaires Index. The Moroccan-born entrepreneur’s first cable venture was a tiny operator founded 20 years ago in the village of Cavaillon in southern France.
Throughout the 1990s, Drahi bought and sold cable companies, deals that eventually led to the creation of Numericable, alongside buyout firm Cinven Group Ltd. Carlyle Group LP invested in 2007 in Numericable, now France’s largest cable provider and a unit of Altice.
Oi is selling its Portuguese and African assets to participate in consolidation in the Brazilian market. It hired Banco BTG Pactual SA in August to explore a purchase of Telecom Italia SpA’s stake in its local wireless unit, Tim Participacoes SA. When interim chief Bayard Gontijo was asked on Nov. 13 whether Oi could merge with Tim, he said he “won’t have any prejudice” on how Oi would take part in consolidation.