(New throughout, updates with CVM decision, adds implications,
By Joan Magee and Guillermo Parra-Bernal
NEW YORK/SAO PAULO, April 1 Brazil's securities
industry watchdog CVM on Tuesday lifted a suspension on Grupo Oi
SA's 6 billion real ($2.7 billion) share offering,
paving the way for the Brazilian telecommunications company's
merger with Portugal Telecom SGPS SA.
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
lunch the offering late on Tuesday, pending the CVM decision,
two sources with knowledge of the situation told Thomson
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 SAB
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.
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
($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)