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Saudi Arabian telecom group STC is to buy nearly 10 percent of Spain’s Telefónica for 2.1 billion euros, marking the Gulf state’s latest move into Europe.
STC, majority-owned by the Saudi sovereign wealth fund, said in a release that it had acquired a 4.9 percent stake in Telefónica and was using other financial instruments to increase its stake to 9.9%.
Telefónica is one of the largest companies in Spain. STC’s plans would see it overtake CaixaBank and BBVA — two mainstays of the Spanish corporate world that hold large stakes in the group — as its largest shareholders. But STC said it was not seeking a controlling stake.
The deal needs approval from the Spanish government because Telefónica has businesses related to national security and cyber defense.
STC CEO Olayan Alwetaid said in a statement that the company views the acquisition as “a compelling investment opportunity that leverages our strong balance sheet while maintaining our dividend policy”.
Telefónica, which was valued at 22 billion euros before the announcement, said it had been informed of the STC’s move on Tuesday. It noted “STC’s friendly attitude and its support for the management team, Telefónica’s strategy and ability to create value”.
Spain remains Telefónica’s largest market, accounting for 27% of revenue last quarter, followed by Brazil at 20%, Germany at 18% and the UK (where the company owns part of Virgin Media O2) at 13%.
The Madrid-based company has a “best-in-class portfolio of unique infrastructure assets” and is developing cutting-edge technologies in areas such as cognitive intelligence and the Internet of Things, STC said.
The Saudi group said that in addition to acquiring a 4.9% stake in Telefónica, it had acquired “financial instruments that provide economic exposure to another 5% of Telefónica’s share capital.” It said it would “acquire the voting power corresponding to this 5% through…”. . Settle these financial instruments upon obtaining the necessary regulatory approvals”.
Under Spanish law, authorities must authorize foreign investors to acquire any stake of 5 percent or more in certain “strategic” defense companies, including Telefónica.
A few months ago, STC subsidiary Tawal bought tower infrastructure from United Group for 1.2 billion euros, while the Gulf state used its wealth (boosted by higher oil prices) to find a deal amid plunging valuations. trade. Last year, Saudi Arabia’s sovereign public investment fund backed a successful bid for Vodafone’s tower business.
Neighboring United Arab Emirates investment group e& raised its stake in Vodafone to 14.6% in April from 9.8% in 2022.
In Saudi Arabia, state-backed national champions have been looking to expand their global reach with PIF, which invests in everything from video game companies and sports to electric vehicles and technology.
The country’s largest bank, the SNB, which bought a 9.9 percent stake in Credit Suisse late last year, inadvertently hastened the bank’s downfall when its chairman ruled out increasing his stake, sending its shares tumbling.
STC is the largest communication company in Saudi Arabia with over 80% market share. It had $17 billion in revenue last year.
Additional reporting by Ivan Levingston in London and Simeon Kerr in Dubai
Svlook
