Telefonica won the battle to buy Portugal Telecom’s stake in joint venture Brasilcel yesterday, but still lost the war as the Portuguese government vetoed the deal at the eleventh hour.
The government used its ‘golden share’ to block the sale of Portugal Telecom’s 50% stake in Brasilcel, despite 73.9% of Portugal Telecom shareholders voting to accept Telefonica’s €7.15 billion offer in an EGM yesterday.
Portugal’s government holds 500 class A shares in Portugal Telecom, and has the right to block share sales to prevent a hostile takeover of the telco.
It cast its vote after the main meeting, claiming the sale was not in Portugal’s national interests WSJ.com reports.
In an ironic twist, the European Court of Justice is due to deliver a ruling on the legality of the golden share on July 8, Reuters reported.
If the court decides the share is anti-competitive, it could clear Telefonica to mount a legal challenge against the government interference.
A statement from Telefonica’s board explained it would leave its offer on the table until July 16, adding that it believes the golden share is illegal.
The government’s intervention even took Portugal Telecom by surprise, with chairman Henrique Granadeiro telling the Wall St Journal that the telco’s board was convinced the golden share “wasn’t applicable in this situation.”
Telefonica did everything possible to ensure the vote went its way, increasing its bid twice, and selling the bulk of its 10% stake in Portugal Telecom to avoid being locked-out of the vote.
Brasilcel is the majority shareholder in Brazilian mobile carrier Vivo, and Telefonica reportedly planned to merge the wireless operator with its fixed-line carrier Telesp, which would have generated synergies of €2.8 billion, WSJ.com reported in May.