Vivendi takes over Brazil's GVT, trumps Telefonica

SAO PAULO (Reuters) - France's Vivendi on Friday gained control of Brazilian telecom company GVT for up to 4.12 billion reais ($2.39 billion), trumping Spain's Telefonica to gain a foothold in Latin America's biggest market.

In a surprise move, Paris-based Vivendi (VIV.PA) said it acquired 37.9 percent of GVT's (GVTT3.SA) voting shares for 56 reais each, and disclosed that it had the right to exercise irrevocable options for an additional stake of 19.6 percent.

In a statement, Vivendi also said it will file a mandatory tender offer of 56 reais a share for all of GVT's share capital. Vivendi's bid values GVT at 7.2 billion reais, or about $4.8 billion.

The counterbid, which sources familiar with the situation said was spearheaded by Vivendi Chief Executive Jean Bernard Levy himself, outmaneuvered Spanish telecom giant Telefonica (TEF.MC), which had been aggressively seeking GVT.

Vivendi's foray into Brazil follows Levy's drive to expand into fast-growing emerging markets as business in the developed world sags because of the global recession.

The French media group, which owns the Universal music company and mobile and fixed-line carriers in France and Morocco, will provide GVT with the necessary financial muscle to face bigger rivals like Mexico's Telmex (TELMEXL.MX)(TMX.N) and Telefonica.

Vivendi outmatched Telefonica's 50.5 reais a share offer made on November 4 by 10.9 percent. Telefonica's $4 billion bid had been seen by most analysts as a sure winner.

With Friday's deal, Vivendi averted a bidding war with Telefonica, something the company has long sought to avoid. The company first made a friendly approach for GVT in September, offering 42 reais a share.

Vivendi's management has been vocal about buying assets that do not endanger the company's investment-grade debt ratings or put at risk its policy of paying high dividends.

BLOW TO TELEFONICA

Vivendi's win is a major blow for Telefonica, which looked poised to win GVT with the government's blessing.

Brazil's telecoms watchdog Anatel had ruled on Thursday that Telefonica could proceed with plans to take over GVT under a series of restrictions such as keeping financial operations and the brand autonomous for five years.

Anatel also ruled that no restrictions would apply in an eventual purchase of GVT by Vivendi.

Faced with eroding margins and saddled with fines for poor service in Sao Paulo state, Telefonica wanted GVT to help it revive bottom-line growth.

The entry of a new player has long been seen as a welcome opportunity to break the near-stranglehold on broadband in Sao Paulo held by Telefonica's Telesp (TLPP4.SA) unit and rival Net Servicos de Comunicacao (NETC4.SA).

"Relative to the news that circulated this afternoon, Telefonica wishes the best to GVT," a Telefonica spokeswoman said by telephone.

GVT management and controlling shareholders view a tie-up with Vivendi as positive because it would let them pursue their growth strategy with little interference, Chief Executive Amos Genish told Reuters on September 9.

"We would be a better company with Vivendi," Genish said at the time. Telefonica wanted to retain management -- seen as the magic behind GVT's success.

GVT's shares closed up 0.64 percent on Friday at 53.34 reais a share, after falling as much as 4.4 percent earlier in the session.

($1=1.722 reais)

(Reporting by Guillermo Parra-Bernal and Cesar Bianconi, editing by Matthew Lewis)