Lisbon — Portugal’s largest company, Portugal Telecom was the target on Monday of a massive € 11 billion ($13.16 billion) takeover bid by Sonae, the country’s shopping mall giant.
PT controls 90% of Portugal’s fixed telephony and cable TV sectors, and 50% of the mobile phone market and film distribution and exhibition business.
Sonae aims to acquire at least 50.01% of PT, valued at €5.5 billion ($6.6 billion). If successful, Sonae will also have to launch a takeover bid for the film and cable TV division, PT Multimedia, valued at $1.8 billion.
Outright acquisition of all PT’s interests would require a total outlay of $15.1 billion – equivalent to 10% of Portugal’s GDP.
The bid is dependent on PT abandoning a 10% ownership limit and avoiding usage of state-owned golden share, that until now has enabled the Portuguese government to maintain control over the company. These protectionist regulations are currently being reviewed by the European Commission and will almost certainly have to be relaxed in the near future.
Sonae has a major telecommunications division (Sonae.com), which is 23.7% owned by France Telecom. Analysts believe that one of the main players behind the takeover bid is indeed France Telecom, which in 2005 extended its interests in Spain.
The bid may well provoke a counter bid by Spain’s Telefonica that currently owns 9.9% of PT and has also expressed its interest in extending its shareholding as soon as ownership restrictions are relaxed. Competition between France Telecom and Telefonica is thus likely to be the back-drop to the struggle for control of PT.
The main concern in Portugal’s political circles, especially in its socialist government, will be how to maintain national influence over a crucial player in the country’s economic future. One of the immediate consequences of this takeover battle is likely to be the introduction of new antitrust legislation, given that PT and Sonae.com jointly own 70% of the mobile telephony market.
The buyout bid is also likely to lead to greater competition in the cable TV business, given that Sonae.com has repeatedly called on the government to free up Portugal’s cable TV market.
A major ripple-through effect is bound to be felt by the Portuguese film and TV business during the course of 2006.