Altice Enters Talks to Buy Oi Assets for $9.2 Billion

Billionaire Patrick Drahi’s cable company entered exclusive talks to acquire Oi SA’s Portuguese assets for about 7.4 billion euros ($9.2 billion), putting it ahead of a rival bid by Apax Partners LLP and Bain Capital LLC.

The binding offer by Drahi’s Altice SA includes a consideration of 500 million euros related to Portugal Telecom’s future revenue, Altice said yesterday. Altice initially bid 7.025 billion euros on Nov. 2, and Apax and Bain made a 7.075 billion-euro joint offer on Nov. 12.

The acquisition would be the second multibillion-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 more than $18 billion in debt and to take part in consolidating Brazil, South America’s largest telecommunications market.

A sale would also unravel Oi’s plan for a trans-Atlantic telecommunications carrier through a merger with Portugal Telecom agreed a year ago.

Shares of Portugal Telecom SGPS SA, the company that no longer controls the operating businesses and whose main asset is a minority stake in the enlarged Oi, fell 6.3 percent to 1.41 euros at 12:27 p.m. in Lisbon. Altice gained 6.6 percent to 57.67 euros in Amsterdam. Oi rose 2.9 percent to 1.42 reais in Sao Paulo.

Brazil Consolidation

The Portuguese phone assets had 2013 earnings before interest, taxes, depreciation and amortization of 1.1 billion euros on revenue of 2.6 billion euros. They will add to Altice’s cable units Cabovisao and Oni in the country.

Drahi, 51, has a net worth of about $10 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 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.

As part of its defense strategy, Telecom Italia is weighing an acquisition of Oi, people familiar with the matter said in September.

Unravel Plan

Oi and Portugal Telecom agreed a year ago on a merger 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.

Altice has said that its offer doesn’t include the 897 million euros in short-term debt that Rioforte defaulted on.

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