By Chesney Hearst, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – Brazil’s largest telecommunications company, Oi is set to advance towards its goal of merging with Portugal Telecom by raising funds through completion of a share sale that aims to raise a minimum R$7 billion from investors around the world, at a price of about R$2.50 per preferred share (without vote).
The public share offerings open Monday, April 29th on the New York Stock Exchange (NYSE) and on Wednesday, April 30th on Brazil’s stock exchange (Bovespa).
The minimum of R$7 billion would allow Oi and Portugal Telecom to proceed with their merger to become CorpCo, a new telecommunications group which would serve more than 101 million customers.
On March 27th, The National Telecommunications Agency (ANATEL) approved of Oi and Portugal Telecom merging to become CorpCo. Previously in January the Administrative Council for Economic Defense (CADE) approved without restrictions, finding that the merger would not raise competitive issues in Brazil.
However, several market analysts concerned about the instability of shares and the future of CorpCo, remain reluctant to recommend that their clients invest in the shares.
“The offering is necessary for Oi to raise funds and to be able to invest more. It is a test of confidence in the market,” Lenon Borges, an analyst at Ativa Corretora (Brokerage) told O Globo. “But our view remains quite negative for the company, even with the offering being successful. We are advising our clients to stay out of action until CorpCo begins to show its first balances. We need to see improvement in the debt profile first.”
Oi Controllers, Telemar Participacoes hold R$4.5 billion in debt. BTG Pactual,the lead underwriter in the transaction, along with thirteen additional banks involved, hope to raise a minimum of R$8 billion in capital to pay off Telemar’s debt. allowing its shareholders to relinquish control of Oi.
Since the beginning of the year Oi’s preferred shares have fallen thirty percent.
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