By Elisabeth O'Leary
MADRID, Nov 10 (Reuters) - A Spanish competition watchdog on Wednesday gave the green light for telephone giant Telefonica and media group Telecinco to take stakes in media group Prisa's pay-TV unit Digital+.
The agreement is widely considered to be a lifeline for Prisa, which has struggled to restructure and pay off near 5 bilion euros debts during a crippling recession.
Competition watchdog CNC said Telecinco and Telefonica had renounced their veto rights over strategic decisions at the pay-TV company, making Prisa the only party able to excercise 'decisive influence' over Digital+, including naming management.
Prisa later said in a statement that Telecinco had agreed to take a 1-year option allowing it to revert to the original terms of the deal, that is, giving it veto rights if antitrust authorities were agreeable. If the authorities do not approve, Telecinco may decide not to take up its part of Digital+.
As it stands, the agreement would nevertheless allow Prisa to pay off 1.0 billion euros in debt, the media firm said.
CHANCE TO REDUCE DEBT
Analysts said the news was positive for Prisa, removing uncertainties about the divestment and therefore its ability to pay off nearly 5 billion euros in debt.
'The control of Digital+ will rest solely under Prisa, which means that the company should be able to carry out its strategy without concerns or limitations imposed by the new minority shareholders.' broker JB Capital Markets said in a note to clients. 'This is particularly relevant in terms of signing content deals and in joint commercialization agreements with rivals to Telefonica, for example.'
As for Telecinco, with whom Prisa has a wider free TV deal signed late last year and approved last month, it will allow the company to go ahead with a rights issue which has been weighing on the shares.
'The new conditions do not alter Prisa's exclusive control over Digital+ and therefore there is no modification in the control structure of Digital+ and therefore no merger agreement that needs to be authorised previously by the CNC,' the watchdog said in a statement.
Shares in Prisa were up 6.2 percent at 2.07 euros at 1312 GMT, while those of Telecinco were down 0.9 percent to 9.587 euros, little changed from earlier in the session. The deal is not considered big enough to impact Telefonica's share price for the moment.
Under the agreement reached last year, Prisa will receive a stake of some 18 percent in Telecinco as well as up to 500 million euros of cash.
Telecinco is expected to issue around 123 million shares to fund the deal, although the exact number will depend on demand.
(Reporting by Elisabeth O'Leary and Robert Hetz; Edited by Fiona Ortiz and Jane Merriman) Keywords: PRISA TELEFONICA/ (elizabeth.oleary@reuters.com; +34 91 585 8295; Reuters Messaging: elizabeth.oleary.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MADRID, Nov 10 (Reuters) - A Spanish competition watchdog on Wednesday gave the green light for telephone giant Telefonica and media group Telecinco to take stakes in media group Prisa's pay-TV unit Digital+.
The agreement is widely considered to be a lifeline for Prisa, which has struggled to restructure and pay off near 5 bilion euros debts during a crippling recession.
Competition watchdog CNC said Telecinco and Telefonica had renounced their veto rights over strategic decisions at the pay-TV company, making Prisa the only party able to excercise 'decisive influence' over Digital+, including naming management.
Prisa later said in a statement that Telecinco had agreed to take a 1-year option allowing it to revert to the original terms of the deal, that is, giving it veto rights if antitrust authorities were agreeable. If the authorities do not approve, Telecinco may decide not to take up its part of Digital+.
As it stands, the agreement would nevertheless allow Prisa to pay off 1.0 billion euros in debt, the media firm said.
CHANCE TO REDUCE DEBT
Analysts said the news was positive for Prisa, removing uncertainties about the divestment and therefore its ability to pay off nearly 5 billion euros in debt.
'The control of Digital+ will rest solely under Prisa, which means that the company should be able to carry out its strategy without concerns or limitations imposed by the new minority shareholders.' broker JB Capital Markets said in a note to clients. 'This is particularly relevant in terms of signing content deals and in joint commercialization agreements with rivals to Telefonica, for example.'
As for Telecinco, with whom Prisa has a wider free TV deal signed late last year and approved last month, it will allow the company to go ahead with a rights issue which has been weighing on the shares.
'The new conditions do not alter Prisa's exclusive control over Digital+ and therefore there is no modification in the control structure of Digital+ and therefore no merger agreement that needs to be authorised previously by the CNC,' the watchdog said in a statement.
Shares in Prisa were up 6.2 percent at 2.07 euros at 1312 GMT, while those of Telecinco were down 0.9 percent to 9.587 euros, little changed from earlier in the session. The deal is not considered big enough to impact Telefonica's share price for the moment.
Under the agreement reached last year, Prisa will receive a stake of some 18 percent in Telecinco as well as up to 500 million euros of cash.
Telecinco is expected to issue around 123 million shares to fund the deal, although the exact number will depend on demand.
(Reporting by Elisabeth O'Leary and Robert Hetz; Edited by Fiona Ortiz and Jane Merriman) Keywords: PRISA TELEFONICA/ (elizabeth.oleary@reuters.com; +34 91 585 8295; Reuters Messaging: elizabeth.oleary.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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