Saudi Telecom Co. is taking a nearly 10% stake in Spain’s Telefonica SA for roughly $2.25 billion as the struggling Madrid-based phone carrier prepares to lay out a new strategy for future growth.
The Saudi government-controlled company purchased about 569.3 million shares and is using financial instruments that will altogether hand it a 9.9% interest in Telefonica once approved by regulators, according to a filing posted late Tuesday. The transaction was funded with a combination of the company’s own resources and bank debt, according to the company. Telefonica was up 1.7% at $4.17 on the news at 3:31 p.m. in New York.
The acquisition is bound to draw scrutiny from the Spanish government, which views Telefonica as a company of strategic importance, operating infrastructure that is critical to the nation’s defenses. Stake acquisitions of more than 5% may require approval from the the country’s cabinet. The carrier has long counted two Spanish banks, CaixaBank SA and Banco Bilbao Vizcaya Argentaria SA, as its anchor investors, and they altogether own less than 10% of the company.
Saudi Telecom made clear in a statement that it doesn’t plan to gain control or take on a majority stake in Telefonica. “We see this as a compelling investment opportunity to use our strong balance sheet whilst maintaining our dividend policy,” it said.
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