E A Shareholder's View On Portugal Telecom's Impropriety

Portugal Telecom's call options for Oi shares depend on monetizing the assets hidden in Luxembourg entities by the former family owners of Banco Espirito Santo of Portugal. The Portuguese bank has now been recapitalized by the state as Novo Banco and the rest is up for grabs. It is held by a bunch of Swiss and Luxembourg interconnected holding companies, the top one of which is Rioforte, which owes PT the repayment of a short-term private placement of euros 897 mn. 

Here are some of the deals being cooked up now for operations directly controlled by Rioforte, as tabulated by Neue Zuericher Zeitung:

  1. Tranquilidad, the insurance giant, with sales of euros 1 bn and net profits last year of euros 19 mn is being bid for by US Apollo Global Mgm for an estimated euros 215 mn, including ~150 mn to recapitalize the firm. That means about euros 65 mn in cash is being paid. There are also other insurers like BES Vida, Seguros Logo, T-Vida, and so on;

  2. Espirito Santo Saude (Healthcare) controlled through Rioforte and another holding co., is a listed company operating 18 hospitals and clinics and it is a target of a Mexican company, Gruppe Angeles, which offered euros 4.3 per share, or euros 410 mn last week. However, two Portuguese counter-bids, from José de Mello Saude and an insurer, Fidelidade, plus one from the aggressively expanding Chinese Fosun group, which already has bid for a non-related Portuguese bank, and another fromGruppe Amil of Brazil mean this asset is going to be in a global bidding war;

  3. The posh Tivoli hotel group which operates in both Portugal and Brazil was already on the market before the BES krach, and the lead bidder was a group headed by Spain'sIberostar hotel chain which offered euros 333 mn but there are rumors that other bid are coming for this directly held bit of Rioforte [Subsequently, American-Thai Minor International Group PCL or MINT, bought the name and 4 Portuguese and 2 Brazilian posh hotels. This is the group of Ellwood Heinecke, which is paying  euros 168 mn. This is only part of what Iberostar bid for]; 

  4. So far there are no visible bidders for other Rioforte tourist holdings, lumped together in Espirito Santo Viagens, which include some gems like Top Atlantico, a travel agency; and some global marques like Carlson Wagon Lits, also directly controlled by Rioforte;

  5. Banking assets which presumably are solvent, are held via Espirito Santo Financial Group, a sub of Rioforte: Banque Espirito Santo et la Vénétie in Italy, ES Bank Panama, Banque Privée Espirito Santo in Switzerland;

  6. Real estate and agriculture companies in Brazil and Portugal are directly owned by Rioforte;

  7. Energy investments directly owned by Rioforte are mostly in Brazil.

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I am a shareholder in Portugal Telecom.

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