One of Europe's biggest takeover battles begins tomorrow in Portugal when Sonaecom's 10.7 billion euro (US$13.8 billion) hostile bid for its larger rival Portugal Telecom gets under way.
Sonaecom unveiled its offer of 9.50 euros per share for what is the nation's biggest listed company in a surprise move last February, but Portugal's stock market regulator only gave the bid its approval on Friday.
The bid, Portugal's largest-ever hostile takeover, will run until March 9, the regulator said in a statement after the market had closed.
The offer is contingent on Sonaecom, the listed subsidiary of Portuguese conglomerate Sonae which is controlled by the country's richest man, Belmiro de Azevedo, obtaining at least 50.01 percent of Portugal Telecom.
Sonaecom also needs to convince a majority of Portugal Telecom shareholders to change a company statute that forbids a single shareholder from holding more than 10 percent of the firm's voting rights.
Portugal Telecom SGPS SA's unions asked the government to veto the offer from Sonaecom SGPS SA for its larger rival.
The government should stop the potential breakup of the Lisbon-based company to ``defend the national economy, telecommunications clients and Portugal Telecom workers,"the unions said in a joint message sent yesterday by e-mail.
If the offer is successful, Sonaecom would move to first place from third among Portugal's mobile-phone operators, while selling some Portugal Telecom assets, partly to satisfy antitrust concerns.
Portugal Telecom, a former state monopoly that was fully privatized in 2000, has urged its shareholders to reject the offer, which it argues undervalues the company and would hurt consumers by creating a high level of concentration.
The firm's chief executive Henrique Granadeiro called Son-aecom's offer "unacceptable" and "unquestionably low."
Shares in Portugal Telecom closed at 10.20 euros on Friday, a gain of 0.69 percent.
"The premium offered by Sonaecom to gain control of the biggest and most prestigious Portuguese firm, Portugal Telecom, is zero. The offer does not reflect the fair price of the company," he told a news conference.
Portugal Telecom has promised to pay shareholders more than 3.5 billion euros in dividends by the end of next year and sell its listed cable television unit PT Multimedia if the bid is rejected.
The firm's biggest shareholders include Spain's Telefonica with 9.96 percent, Portuguese bank Banco Espirito Santo with 8.08 percent and US Fund Brandes Investments Partners with 7.67 percent.
Most analysts believe Sonaecom, in which France Telecom has a 20 percent stake, will have to raise its offer for it to succeed.
"Sonaecom has room to improve the price offered for Portugal Telecom if you take into account the synergies that would result from the merger of [their two mobile units] TMN and Optimus and the possibility of gains from asset sales," said telecoms analyst Teresa Marinho of Portuguese bank Banif.
Additional reporting by Bloomberg
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