By Dominique Vidalon and Nicola Leske PARIS (Reuters) – Vivendi’s shares fell on Monday as investors fretted that its dramatic, high-priced purchase of Brazilian telecom group GVT from under Telefonica’s nose signaled more dealmaking. Vivendi Chief Executive Jean-Bernard Levy — mindful of a huge acquisition spree under former CEO Jean-Marie Messier that left Vivendi with a staggering pile of debt — has cultivated a reputation for shunning overpriced deals. But in a surprise move, Vivendi on Friday said it gained control of GVT for up to 4.12 billion reais, beating Telefonica to gain a foothold in Latin America’s biggest market, where it does not yet have a presence. Vivendi’s bid values GVT at 7.2 billion reais, or about $4.8 billion against Telefonica’s offer of $4 billion. SG credit analyst Juliano Torii said that Vivendi may have been under too much pressure to succeed after walking away from some options in the past and may have rushed into the deal, agreeing to a higher than expected price. “I am concerned that they put the bid together in a bit of a hurry,” Torii said. The move defied the predictions of many analysts who had expected Vivendi to throw in the towel on GVT to stick to a policy of protecting its investment-grade debt ratings and paying high dividends. “We had given high marks to management for its discipline in the past year, avoiding overpaying for assets in Spain and Africa. It would look like even this discipline has been set aside,” said Bernstein Research in a note. Vivendi shares lost 2.7 percent by 1452 GMT, underperforming the higher DJ STOXX telecom and media indexes, and were the worst losers among French bluechip stocks. Telefonica shares gained 0.6 percent as most analysts agreed it was a minor issue for the Spanish telecoms group. Citigroup warned however that there was a 25 percent chance that Vivendi and Telefonica would continue the bidding war. Portuguese broker BPI said there was still room for consolidation in the sector in Brazil, namely in the mobile business, and Telefonica will most likely play a central role. GVT shares rose 3 percent in Brazil. MORE EXPENSIVE M&A TO COME? Vivendi is keen to expand in emerging markets given its mature portfolio, which includes Maroc Telecom and France’s second-biggest mobile phone operator SFR — potentially burdened by a worsening regulatory environment and a fourth mobile operator emerging in France. But the French water utility-turned-global media conglomerate, which owns music company UMG, pulled out of talks with Kuwaiti mobile operator Zain this year over price issues and last year dropped its pursuit of Saudi Arabian phone operator Oger Telecom. Continued… Read the original here: Vivendi investors fret about GVT price
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Vivendi investors fret about GVT price
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