Spain’s Masmovil Bids $2.5 Billion for Phone Rival Euskaltel

Masmovil Ibercom SA offered 2.1 billion euros ($2.5 billion) for smaller Spanish telecommunications rival Euskaltel SA, in a friendly deal set to shake up the country’s highly competitive market.

Masmovil is offering 11.17 euros per share in cash -- Euskaltel’s three largest shareholders, who own a combined 52%, have already accepted the deal, according to a regulatory filing Sunday. The offer marks a 16% premium to Friday’s closing price and Masmovil said it already has financing in place, including bank debt.

Spain has one of the most competitive telecom markets in Europe and consolidation has long been touted as necessary. A tie-up between Masmovil, the fourth-largest carrier, and Euskaltel, the fifth, could be a step in that direction but could also add pressure on the local units of Orange SA and Vodafone Group Plc -- both have struggled in the low-end market. Telefonica SA, the largest operator, is more focused on high-end customers but has also been hit in the cheaper end in recent quarters.

While Masmovil has traditionally been an acquisitive company, the deal for Euskaltel would be its largest to date. Speculation over a tie-up between the two carriers has swirled for at least six years.

Euskaltel surged 16.6% to 11.18 euros per share at 9:05 a.m. in Madrid, after rising as much as 17.4% earlier -- the biggest ever intra-day increase. The shares are up 28% this year.

Masmovil was acquired last year by three buyout firms -- KKR & Co., Cinven Ltd. and Providence Equity Partners LLC -- for 3 billion euros and subsequently delisted, sparking speculation that it would seek to take part in consolidation. Several press stories in recent months signaled that it would seek a deal to merge with Vodafone’s local unit, but talks were repeatedly denied by both carriers.

Euskaltel has been seeking to expand in recent months out of its main market, in northern Spain, and has also been working on a deal to sell a stake in its fixed-broadband unit.

Masmovil’s offer is conditional on regulatory approvals, as well as acceptance from 75% plus one share of the share capital.

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