(Recasts to update with pricing results, background in
By Joan Magee and Guillermo Parra-Bernal
NEW YORK/SAO PAULO, April 28 (IFR/Reuters) - Grupo Oi SA
took the biggest step yet toward combining with partner Portugal
Telecom SGPS SA late on Monday by pricing Brazil's only share
offering this year at the lowest price expected.
Oi, Brazil's largest fixed-line telephone carrier, priced a
sale of preferred shares at 2 reais each, at the
bottom of the suggested range set by bankers, two sources with
direct knowledge of the deal said. The company had indicated a
range of 2 reais to 2.30 reais for the preferred shares.
Common shares were priced at 2.17 reais, a premium of more
than 8 percent to the preferred stock, said the sources, who
declined to be identified because the transaction is underway.
The sources said a pricing near the bottom of the range would
allow the company to ensure strong demand for as many as 5.75
billion shares in the deal and allow banks to buy another 2
billion shares in supplementary and additional allotments.
Details on the size of the placement were not immediately
available on the website of securities industry watchdog CVM.
One of the sources said foreign investors bought about 85
percent of the offering, with the rest going to local
The sources expect the transaction to fetch at least 8
billion reais ($3.6 billion) from investors, helping Oi to
reduce a stifling debt load.
The recapitalized Oi, which also controls Brazil's
fourth-largest mobile phone carrier, plans to use its stronger
balance sheet to form CorpCo, the proposed name of the company
after the tie-up with Portugal Telecom.
Each Oi common share would be exchanged for 1 share in
CorpCo and each Oi preferred share would be swapped for 0.9211
Executives at Oi and Portugal Telecom say CorpCo will have
more clout to compete in Brazil with bigger rivals such as the
local unit of Spain's Telefonica SA , Telecom
Italia SpA's TIM Participações SA and
Mexico's America Movil SAB.
Oi's preferred shares closed at a record low on Monday,
shedding 5.6 percent to 2.37 reais, while common shares were
down 0.4 percent to 2.52 reais.
Stock offerings in Brazil are off to their worst start this
year in more than a decade, the latest sign of eroding investor
confidence in Latin America's largest economy.
Before Oi's share sale, no initial public offering or
follow-on sale had been filed with the CVM since mid-December,
which is unheard of since at least 2004, according to Thomson
Reuters data. A truncated capital markets calendar, rising
political risks and the emergence of attractive investments
elsewhere have left investment bankers struggling after they
thrived for years with easy-to-sell IPOs.
The Oi offering took off, according to investors heard by
Reuters and the IFR, because banks involved in the transaction
structured it with a series of guarantees to lure buyers.
By early Monday afternoon, investors had pledged to buy a
little more than 10 billion reais worth of stock in the
offering, said the sources.
Grupo BTG Pactual SA, the largest listed Latin
American investment bank, is handling the transaction, along
with the investment-banking units of Bank of America Corp
, Barclays Plc, Citigroup Inc, Credit
Suisse Group AG, Banco Espírito Santo SA and
HSBC Holdings Plc.
São Paulo-based BTG Pactual, controlled by billionaire
financier André Esteves, pledged 2 billion reais in fresh
capital for Oi and structured the participation of as many as 13
other banks in a scheme to bolster the offering if investor
Banco do Brasil SA. Banco Bradesco SA,
Banco Caixa Geral de Depósitos SA, Goldman Sachs
Group Inc, Itaú Unibanco Holding SA, Morgan
Stanley & Co and Banco Santander SA are also
Under terms of the deal, Portugal Telecom will contribute
its assets, excluding its stake in Oi, and own 38 percent of the
new company. Oi's major shareholders excluding Portugal Telecom
would have as much as 30 percent of CorpCo and other investors
such as BTG Pactual and a number of Brazilian pension funds
would own the rest.
($1 = 2.23 Brazilian reais)
(Additional reporting by Brad Haynes in São Paulo; Editing by