Regulators last week halted the offering after Oi Chief Executive
Officer Zeinal Bava breached a mandatory quiet period ahead of the
transaction. Grupo BTG Pactual SA, the bank handling the deal, and
Oi agreed to urge investors to ignore Bava's remarks, a condition
CVM said in a statement was enough to lift the suspension.
The decision takes effect past midnight and allows Oi to launch the
offering within hours. Bankers were preparing to launch the offering
late on Tuesday, pending the CVM decision, two sources with
knowledge of the situation told Thomson Reuters' IFR.
The offering is the backbone of Oi's planned capital increase of 14
billion reais that will allow it to tie up with Portugal Telecom,
its biggest shareholder. The offer was originally scheduled to price
on April 16.
Last week, shareholders of Oi and Portugal Telecom approved the
capital increase and separate asset appraisals at their respective
assemblies in Rio de Janeiro and Lisbon. Executives at the companies
say the tie-up will give the resulting entity more clout to compete
inside Brazil with bigger rivals such as Spain's Telefonica SA,
Telecom Italia SpA's TIM Participações SA and Mexico's America Movil
The shorter timeline underscores Oi's urgency to get the deal done
before more banks endorsing the offering have second thoughts. Banco
Bradesco SA and Itaú Unibanco Holding SA are considering pulling out
of the deal because of demands by regulators that they to buy up
remaining shares if demand falls short, two sources told Reuters,
requesting anonymity given the sensitivity of the issue.
Itaú and Bradesco, both based in São Paulo, as well as another 12
banks signed a firm commitment to the transaction about two weeks
ago. Oi had obtained firm commitments from a group of lenders led by
Grupo BTG Pactual SA, sources told Reuters late in March.
Portugal Telecom and Oi have been discussing how to merge since the
former bought 25 percent of Oi in 2010. The market value of both
companies has fallen more than half over the past three years, a
sign investors believed a merger would take place sooner or later.
Many Oi shareholders have criticized the tie-up, saying the capital
increase favors Oi's largest shareholders, including Portugal
Telecom, at the expense of minority investors.
[to top of second column]
Oi common shares tumbled 6.2 percent in Tuesday trading. Preferred
shares of the company fell 7.7 percent. Itaú and Bradesco were both
up about 1 percent.
Bloomberg News first reported the possibility of banks backing out
of the deal on Tuesday. According to the Bloomberg report, a group
of four banks, including Itaú, Bradesco, Goldman Sachs Group Inc and
Citigroup Inc are weighing pulling out of the deal.
Oi, Itaú and Bradesco declined to comment. Goldman Sachs and
Citigroup had no immediate comment on the Bloomberg report.
Other banks involved in the operation include Bank of America Corp,
Barclays Plc, Credit Suisse Group AG, Banco Espírito Santo SA, Banco
do Brasil SA, Caixa Geral de Depositos SA, HSBC Holdings Plc, Morgan
Stanley & Co, and Banco Santander Brasil SA.
($1 = 2.25 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Additional reporting by
Luciana Bruno in Rio de Janeiro, and Brad Haynes and Walter
Brandimarte in São Paulo; editing by Sofina Mirza-Reid, Andre Grenon
and David Gregorio)
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