Cablevisión Holding S.A. (CVH) announced last week that its Cablevisión S.A. subsidiary and Telecom Argentina S.A. (NYSE: TEO, BCBA: TECO2) have agreed to merge. The merger will position the combined company to take advantage of the planned opening of the telecommunications sector in Argentina, which is to begin in January 2018. This positioning will include mobile technology infrastructure investments as well as the deployment of a high-speed fiber-optic network.
CVH describes its Cablevisión S.A. subsidiary as the largest paid television provider in Argentina and the broadband market leader in that country, as well as the second largest paid television provider in Uruguay (see "LATAM Snapshot: Cablevisión Argentina"). Telecom Argentina supplies mobile and fixed telecommunication services in Argentina as well as mobile telecommunications services in Paraguay. The agreement, approved by each company's board of directors on June 30, calls for Telecom Argentina to absorb Cablevisión and offer a wider range of services.
"The services offered by both companies are complementary. This merger will allow us to develop a quadruple play proposal, which in the world allows clients to access fixed landline, mobile phone, television and broadband internet," explained Carlos Moltini, CEO of Cablevisión.
The financial terms of the agreement call for Telecom Argentina to increase its share capital by $1,184,528,406. On the effective date of the merger, the service provider will issue that number of shares of common stock. Each share shall be registered, have a nominal value of $1, hold one vote, and will be issued either as class A shares or as a new class of shares of common stock (Class D). The new stock will be distributed to the shareholders of Cablevisión, in accordance with the agreed exchange ratio, which is 9,871.07005 shares of Telecom Argentina for each Cablevisión share. The culmination of this share offer will see CVH, which is the controlling shareholder of Cablevisión, and Fintech Media LLC, Cablevisión's minority shareholder, receive a total direct and indirect interest in Telecom Argentina of 55% after the capital increase. The current shareholders of Telecom Argentina will retain the remaining 45% of the share capital.
The transaction is subject to approval by the respective companies' shareholders and regulatory authorities.