Billionaire Drahi to Buy Oi’s Portuguese Assets for $9.1 Billion

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Patrick Drahi’s cable company agreed to buy Oi SA’s Portuguese phone assets for 7.4 billion euros ($9.1 billion), expanding the billionaire’s telecommunications empire in Europe.

Oi’s board approved the sale of PT Portugal SGPS SA to Altice SA, Drahi’s Luxembourg-based cable holding company, Oi said yesterday. The deal includes a consideration of 500 million euros related to PT Portugal’s future revenue. The price Altice is paying for the assets in Portugal, as well as Hungary, will be adjusted when the transaction is completed.

The purchase is Franco-Israeli tycoon Drahi’s second major deal this year, bringing annual sales at Altice’s businesses to more than 15 billion euros as European carriers merge to reduce costs and revive earnings. The acquisition also makes Altice a stronger competitor to NOS SGPS SA, Portugal’s biggest cable-TV provider, as well as wireless provider Vodafone Group Plc.

For Rio de Janeiro-based Oi, the proceeds will help the phone company pare its debt and to take part in consolidating Brazil, South America’s largest telecommunications market. Oi is backing away from ambitions to become a trans-Atlantic phone carrier after announcing the acquisition of the Portuguese assets last year in a merger with Portugal Telecom.

“With this step concluded, Oi continues its objective of reinforcing its financial capacity in order to maintain its objective of leading the consolidation movement in the Brazilian telecommunications market,” Oi said in its statement.

Sweetened Offer

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.

Altice shares fell 0.4 percent to 60 euros at 9:03 a.m. in Amsterdam, valuing the company at 14.9 billion euros. Oi fell 1.6 percent to 1.20 reais in Sao Paulo yesterday, for a market value of $4.1 billion.

A potential complication to the takeover 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 phone.

African Hurdle

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.

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.

Rioforte Debt

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

The Portuguese phone assets will add to Altice’s cable units Cabovisao and Oni in the country. Oi’s Portuguese assets had 2013 earnings before interest, taxes, depreciation and amortization of 1.16 billion euros on revenue of 2.9 billion euros, according to Portugal Telecom’s most recent annual report.

Drahi, 51, has a net worth of $11.1 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 Group, 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.

With takeovers in France and Portugal, Altice has added more than 13 billion euros in revenue this year to the 3.2 billion euros it reported for 2013. In November, it completed a transaction to combine French wireless operator SFR with cable Numericable in a $23 billion deal. This month, it completed a purchase of smaller French carrier Virgin Mobile.

Europe Deals

As phone rivals in Europe seek accords to consolidate, Drahi’s next target may be Bouygues SA’s telecommunications unit in France, Altice Chief Executive Officer Dexter Goei said in November. Altice’s Portuguese pursuit won’t hamper the company’s ability to do another transaction of that size without raising funds, Goei said at the time.

Europe’s telecommunications companies are combining to pool network-upgrade costs and sell packages of mobile, Internet and TV services. In the U.K., BT Group Plc is in talks to buy Telefonica’s O2 unit or Deutsche Telekom AG and Orange SA’s EE to expand its wireless offering and complement its broadband network, the largest in the country.

Vodafone is exploring a combination with John Malone’s Liberty Global Plc that would create Europe’s largest phone, Internet and TV company, worth more than $130 billion, people with knowledge of the matter said last month.

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. Telecom Italia directors last month authorized the company to explore a potential transaction between Tim and Oi.