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* Euskaltel shares hit five-year high
* Merged company would compete with three bigger players
* Biggest shareholder says deal is "a slam dunk"
MADRID, March 29 (Reuters) - Spanish telecoms group
Euskaltel said on Monday it would cooperate on a
2-billion-euro ($2.35 billion) takeover bid by larger rival
MasMovil, which is set to shake up the country's competitive
Shares in Euskaltel surged 16% in early trade on Monday, a
day after MasMovil announced a friendly takeover bid for the
company, with an offer priced at a 16.48% premium to Friday's
Euskaltel's major shareholders Zegona, Kutxabank and Alba
Europe - which combined own 52.32% of Euskaltel - have agreed to
accept the offer of 11.17 euros per share, MasMovil said on
Zegona Chief Executive Eamonn O'Hare told Reuters that eight
other investors needed to agree to back the deal. "It's going to
be a slam dunk," he said.
Euskaltel said it would give MasMovil "needed support" that
was reasonable to carry out the takeover and prepare documents
to secure approval from regulators.
Euskaltel, which had focused on the Spanish regions of the
Basque country, Galicia and Asturias, pushed outside of its
traditional market last year when it offered British billionaire
Richard Branson's Virgin brand across Spain.
A merger with Masmovil could create stronger competition for
Spain's three main telecoms operators Telefonica,
Vodafone and Orange.
Euskaltel's share price hit its highest level in five years
on Monday, adding about 0.3 billion euros to the company's
Euskaltel said its board would set out its position
regarding the bid.
MasMovil, which is owned by private equity funds,
Providence and Cinven, said its approach was friendly and would
only proceed if accepted by holders of at least 75% plus one
share of Euskaltel's capital.
Zegona's O'Hare said he expected the deal to close early in
the fourth quarter, chiming with brokers Canaccord Genuity who
said in a note that the tender process should take about six
months, and faced little regulatory risk.
Euskaltel had been working on selling a 49% stake in its
broadband infrastructure arm to help raise cash. O'Hare said
that if the Masmovil offer hadn't come along Euskaltel that
stake sale would probably have gone ahead.
($1 = 0.8502 euros)
(Reporting by Inti Landauro, Ingrid Melander, Aida
Pelaez-Fernandez, Kate Holton and Isla Binnie; Editing by Edmund
Blair, Louise Heavens and Susan Fenton)