The board of directors of Brazilian telecommunications company GVT Holding SA (GVTT3.BR) on Tuesday night recommended removal of a poison-pill clause from the company's by-laws, paving the way for approval of a takeover bid.

The recommendation must still be approved by shareholders at a general meeting.

On Friday, Telesp, which is the local unit of Spain's Telefonica SA (TEF.MC), requested regulatory approval for a $3.7 billion cash bid for GVT. The offer represents 48 reals ($27.80) per share. The bid trumped an earlier one by France's Vivendi SA (VIV.FR) of BRL42 per share.

Under the company's poison-pill rules, any takeover bid must exceed by 25% the highest price of the company's shares in the latest 12-month period. On Tuesday, the company's shares closed down 0.48% at BRL47.02 in Sao Paulo.

"It is beneficial for the company's shareholders to allow competing bids to maximize shareholder value," said the GVT board of directors in a statement.

The company called a general meeting for Nov. 3 to decide on removal of the poison-pill clause. GVT will publish the decision of its shareholders on Nov. 5.

-By Rogerio Jelmayer, Dow Jones Newswires; 5511-2847-4521; rogerio.jelmayer@dowjones.com