Portugal Telecom to merge with Brazilian affiliate Oi

New company will have annual revenues of 12.4 billion euros

Madrid -

Portugal Telecom announced Wednesday that it had agreed to merge with its Brazilian affiliate Oi in a deal that will create a Brazilian-incorporated company to be called CorpCo with 100 million customers, pro forma revenues last year of 12.4 billion euros, and a gross operating profit of 4.2 billion.

“CorpCo will benefit from enhanced scale and a leading position in Portugal and Brazil,” PT said in a statement. The merger is expected to generate synergies worth some 1.8 billion euros. Oi is currently Brazil’s fourth-largest mobile operator.

PT already owns 12.1 percent of Telemar Participações, the holding company that controls Oi. To execute the merger, Oi will launch a rights issue to raise as much as 2.7 billion euros to which Telemar Participações and another holding company will subscribe to the amount of 700 million euros.

PT shareholders will receive 0.6330 CorpCo shares plus an additional 2.2911 euros’ worth of shares in the merged company at the price of Oi’s capital increase. Oi shareholders will receive one share in the new company for every one Oi common share.

On completion of the transaction, which is expected to take place in the first half of next year, PT shareholders will own 38.1 percent of CorpCo.

“Portugal Telecom gets 38 percent of new company without getting involved with the rights issue per se and Oi gets more operational and financial flexibility and additional assets,” Bloomberg quoted Guy Peddy, an analyst at Macquarie in London, as saying.

The company will be headed by PT’s chief executive officer Zeinal Bava, who took charge of Oi in June.

The company will be listed in the Bovespa in Brazil, the NYSE Euronext market and the NYSE. At 3pm PT shares were up 13.15 percent at 3.847 euros.


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