Brazil may take weeks to analyze new Oi-Portugal Telecom accord
RIO DE JANEIRO, July 21
RIO DE JANEIRO, July 21 (Reuters) - Brazil securities watchdog CVM may take weeks to analyze the new terms of a merger between telecommunications companies Grupo Oi and Portugal Telecom SPGS SA that require Portugal Telecom to set aside more treasury-held shares, a former regulator told Reuters.
Last week, Portugal Telecom was forced to cut its stake in the combined company after losing over $1 billion in debt investments. Under the revised terms, Portugal Telecom's stake in the new firm would fall to 25.6 percent from 38 percent. As a result, Oi's shares held in the new company's treasury would rise to 16.6 percent, versus the legal limit of 10 percent.
Rio de Janeiro-based Oi said on July 16 the revised terms required CVM's approval.
Former CVM President Maria Helena Santana said the situation was largely unprecedented in Brazil. Regulators could take weeks to decide to whether to base their ruling on similar cases from the past or start a process from scratch, Santana noted.
"It could be reasonable to think that the CVM will have to pick a board member to analyze the deal. I don't think you have a long history of similar cases there at the CVM," Santana said in an interview.
Under the new accord, Portugal Telecom will give up ownership of 949 million Oi preferred shares and 474 million Oi common shares, which will in turn be kept in the new company's treasury. Portugal Telecom has a six-year call option to buy back the shares, which could potentially boost its stake in the new company, if it recovers some or all of the debt investment.
The size of the call option will decrease annually.
Portugal Telecom's failed debt investments were transferred to Oi's balance sheet in May without formal notification. Under terms of the accord, the debt will now be shifted back to Portugal Telecom. (Writing and additional reporting by Guillermo Parra-Bernal; Editing by Jeffrey Benkoe)
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