* Oi raises total 8.25 billion reais from preferred and
common stock sale
* Including asset swap, the transaction worth 13.95 billion
(Recasts to add details on offering, size, bidders, background)
By Guillermo Parra-Bernal and Joan Magee
SAO PAULO/NEW YORK, April 28 (IFR/Reuters) - Brazilian
wireless and fixed-line carrier Grupo Oi SA took the biggest
step yet toward combining with partner Portugal Telecom SGPS SA
on Monday by completing Brazil's largest follow-on share offer
in almost four years at the lowest price expected.
Oi raised a total 8.25 billion reais ($3.7 billion) from
selling common and preferred stock to local and foreign
investors as well as a fund led by Grupo BTG Pactual SA, the
deal's main adviser, according to a source with direct knowledge
of the transaction. Including an asset swap with Portugal
Telecom, the transaction was worth 13.95 billion reais.
The amount fetched was the largest for a follow-on offering
in Brazilian equity markets since Petróleo Brasileiro SA's
120 billion-real capital increase in September 2010,
according to Thomson Reuters data. The transaction was also the
first share sale completed in Brazil since mid-December.
Oi lured European and U.S. funds, who bought 85 percent of
the 5 billion reais in stock sold to minority investors, by
pricing the securities at the lowest level possible. The cut-off
price for preferred shares was 2 reais, at the bottom
of the 2 reais to 2.30 reais suggested tag. Common shares
were priced at 2.17 reais each, in line with a
proposed premium of about 8 percent to the preferred stock.
Proceeds from the offering will help Oi 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.
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.
Before Monday, stock offerings in Brazil had their worst
start this year in more than a decade, the latest sign of
eroding investor confidence in Latin America's largest economy.
So far until Monday, no initial public offering or follow-on
sale had been filed with the CVM this year, which is unheard of
since at least 2004. 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.
Grupo BTG Pactual SA, the largest listed Latin
American investment bank, is handling the Oi 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.
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
The Oi offering took off, according to investors heard by
Reuters and the IFR, because BTG Pactual
structured the deal with a series of guarantees to lure buyers.
A fund controlled by the São Paulo-based bank subscribed 2
billion reais worth of shares in the offering, the source noted.
Oi and bankers increased the amount of available stock to buyers
by 500 million reais, while a supplementary allotment worth 750
million reais was also placed.
By early Monday afternoon, investors had pledged to buy more
than 10 billion reais worth of stock in the offering, another
two sources told Reuters.
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 = 2.24 Brazilian reais)
(Additional reporting by Brad Haynes in São Paulo; Editing by
Dan Grebler and Himani Sarkar)