Telefonica Hires Law Firm To Study Brazil JV Breakup

Telefonica Hires Law Firm To Study Brazil JV Breakup - Source

Telefonica SA (TEF) has hired a law firm to explore a breakup of its Brazilian joint venture with Portugal Telecom SGPS SA (PT), after the Spanish company decided not to extend its offer to buy out PT's stake in the investment vehicle they owned, a person familiar with the situation said Monday.

Law firm De Braw Blackstone will explore alternatives to breaking up Netherlands-based Brasilcel, the investment vehicle that controls 60% of Brazil's Vivo Participacoes SA (VIV), the person said. The firm advised the two companies when Brasilcel was set up in the early 2000s.

Telefonica let its EUR7.15 billion offer for PT's stake expire on Friday after the board of the Portuguese company asked for more time to study the bid.

In June, 74% of PT's shareholders voted to accept Telefonica's offer, but the Portuguese government vetoed the sale, using its golden shares in the company on grounds that the deal was against the PT's long-term interests.

Both PT and Telefonica see Vivo as key to their future growth prospects as they face declining revenue in their mature home markets and are suffering the lingering impact of a severe recession.

Telefonica is also considering taking its case to an international arbitration court, the person said.

-By Jason Sinclair, Dow Jones Newswires; 34 913958127; jason.sinclair@dowjones.com

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