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The possible merger between Zon and Sonaecom is something that has been discussed on the
market in the last years, and this dissertation aimed to make a thorough analysis of the
companies and whether there is value creation with the completion of the merger.
The telecommunications market in Portugal is reaching a stage of maturity, and the country's
economic situation together with the intense competition makes it difficult for companies to
have a high organic growth. Instead, in recent years companies had results below expectations
mainly due to lower private consumption that is taking place in the country, and its market
value significantly devalued. Therefore, a merger between the companies would allow the
rapid creation of value for Zon and Sonaecom’s shareholders because of both cost and
revenue synergies, along with the fact that the merged company would become a stronger
business and would be able to compete with the main competitor, Portugal Telecom.
Thus, according to the methodology explained in the literature review, I calculated the
Sonaecom standalone value and the synergies from the merger, and the Sonaecom’s last
closing price is found to be undervalued, with 5% upside potential, and synergies are
estimated at around 131% of Sonaecom’s market capitalization1. It is therefore concluded that
Zon must make a tender offer to Sonaecom offering a price of 1.21€ per share plus a premium
that covers the total or partial value of synergies.