Brazilian wireless carrier TIM Participações could soon have new owners. The telecommunications company is the target of a takeover bid that could value the company at 32 billion reais, according to a Reuters report that cited two anonymous sources with direct knowledge of the matter.
The reputed bidders are Grupo Oi SA of Brazil, America Movil SAB from Mexico, and Telefonica SA of Spain. Reuters says those companies have agreed to join together in the offer for TIM. The majority of Brazil’s number two wireless carrier – 67 percent – is currently held by Telecom Italia SpA. According to Reuters, the Rome, Italy-based company has said Brazil is a strategic market but it would consider selling TIM if the right offer came along.
The possible telecom deal comes at a time of increasing global corporate dealmaking. Merger and acquisition activity in the first three quarters of 2014 totaled $2.48 trillion, up 11.7 percent compared to the full year 2013, according to Mergermarket’s third quarter report on global and regional M&A. In terms of total value, most of the deals were done in the energy, mining, and utilities sectors totaling $423 billion for the period. Telecommunications deals accounted for $264.1 billion in M&A activity.
Ernst & Young’s recent survey on M&A activity found that 31 percent of respondents expect to pursue an acquisition in the next 12 months; 27 percent expect to pursue deals greater than $500 million in size. The top destinations where companies expect to deploy capital are China, India, and Brazil.
Reuters notes that the bid for TIM follows speculation in the last year that consolidation in Brazil’s telecom market would be coming, hastened by industry competition, stagnant sales, and the rising cost of new technology. As is the case with most mergers, consolidation would be expected to create synergies that would reduce costs. One source told Reuters that if a bid were successful, the new owners would split up TIM, giving each of them a way to add customers, invest in high-speed networks, and protect profits.
Reuters’ sources tell the news agency that a bid could soon be formally presented. One of the sources expects the bid will not find much industry or regulatory resistance.
TIM is revealing nothing about a possible bid. In a recent securities filing, TIM said that “neither Telecom Italia nor its board of directors are involved in talks about a possible sale of the company.” TIM added in the filing that “neither it, nor its board are aware of any agreement between America Movil, Telefonica, and Grupo Oi to acquire the company.”
