Vivendi makes €2.5bn offer for PTC stake

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Vivendi on Tuesday said it has offered €2.5bn for Deutsche Telekom’s 49 per cent stake in Polska Telefonia Cyfrowa (PTC), Poland’s second-largest mobile phone operator.

The offer, confirmed by a Vivendi spokesman on Tuesday morning, represents the latest twist in the long-running battle between the two companies over the ownership of the Polish telecoms operator, which counts more than 10.2m subscribers.

Until June, Deutsche Telekom owned 49 per cent of PTC, with another 48 per cent held by Elektrim, a Polish conglomerate. But in June, a Vienna-based arbitration tribunal ruled that a call option by DT on Elektrim’s shares was valid, bringing DT’s stake in PTC up to 97 per cent.

Vivendi disagrees, claiming the 48 per cent of shares once owned by Elektrim are still held by a joint company it set up with Elektrim called Elektrim Telekomunikacja (ET).

However, this month Vivendi said it had cut the balance sheet value of its indirect investment in PTC from €531m to zero following recent legal setbacks.

DT declined to comment on Tuesday. However, people close to situation said the German telecom group regards the bid as baseless and is unlikely to consider the offer because it believes the courts have already settled the ownership issue.

The dispute over the ownership of the Elektrim stake in PTC dates back to 1999 when, during the acquisition spree of former chief Jean-Marie Messier, Vivendi agreed to invest €1.8bn in PTC via ET.

But the deal was done without the consent of DT and in 2004, the arbitration tribunal in Vienna ruled invalid Elektrim’s sale of part of its stake to Vivendi.

This opened the door for Elektrim to take back for free the PTC shares held by its joint venture with Vivendi.

However, Elektrim’s failure to retake control of the disputed shares within a two-month deadline allowed Deutsche Telekom to exercise a call option and buy Elektrim’s stake for as little as €350m. Elektrim says it was unable to retake control of the shares because of delaying tactics by Vivendi and plans to sue the French company for damages.

The tribunal is still to rule on the final price DT will have to pay. Elektrim is hoping for as much as €580m, still far below the €2.4bn - €2.6bn the company says its stake is worth.

Vivendi has so far refused to recognise either of the arbitration rulings and the French group has filed lawsuits, challenging the legality of these transactions.

Some industry watchers think Vivendi’s offer is nothing more than tactical stalling.

“[Vivendi] is looking to bid up the price that DT would have to pay for Elektrim’s stake,” said one analyst. “The longer it takes for them to agree on a price, the more chance Vivendi has at continuing its appeal.”

Another analyst said that in the same way Vodafone was forced by investors to sell its Japanese unit, Vivendi could be looking to use shareholder pressure to get DT to sell.

However, both Goldman Sachs and Bear Stearns believed that DT was unlikely to accept the offer.

“DT does not appear to be a seller of its stake now as it would imply that it accepts Vivendi’s view of the ownership of PTC, which is also unlikely,” said Jean-Michel Bonamy from Goldman Sachs.

Nonetheless, the broker said that the deal, if accepted by DT, would be good news for Vivendi as it would increase its exposure to strong growing emerging markets. A deal could potentially boost Vivendi earnings per share by as much as 10 per cent.

PTC last year reported profits of 1.2bn zlotys (€303m) on revenues of 6.7bn zlotys.

Shares in DT fell 3 cents to €12.43, while Vivendi shares gained 1.2 per cent, or 34 cents to €28.43.

With additional reporting by Gerrit Wiesmann in Frankfurt and Adam Jones in Paris

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