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01/14/2009

 

Incorporation of Brasil Telecom by Oi

In this page: Keeps track of the purchase process of Brasil Telecom by Oi.

 

 

  Chronology of the acquisition of BrT by Oi.
04/25/08

Was announced the conclusion of the negotiation for the acquisition of Brasil Telecom (BrT) by Oi. Restructuring of Oi's shareholder composition by Gp and Opportunity leaving.

06/17/08 Beginning of the public concultation to manage changes in the PGO.
10/16/08 Anatel approves the PGO
11/20/08 Was signed the decree as the new PGO.
12/10/08 CADE homologates a deal with Oi which allows the incorporation of Brt while analyses the trade.
12/18/08 Was given given Anatel's previews approval to the trade.*
01/08/09 Oi pays R$ 5.8 million and gets control of BrT.

 

*Oi would have to pay a fine of R$ 490 million to BrT, if the trade wasn't approved until 12/19/08.

 

Next steps:

  • Transference of BrT's control to Oi. (10 days after Anatel's approval, 01/06/09).
  • Public offer of shares (OPA) for acquisition of those BrT's shares which give the right for voting. (30 days after Oi gets the control).
  • CADE's approval.

 

In the following, there are details of each step of the trade:

 

 

Anatel's Previews Approval

 

After having published the new PGO, Oi sent a public approval request to Anatel for BrT acquisition.

 

Anatel is analyzing the request and planning to set counterparts to approve this acquisition. In 12/04/08, Oi sent an offer of conterparts that would involve internet internalization, attendance to defense and suport to national research.

 

Oi will have to pay a fine of R$ 490 million to BrT, if the trade doesn't get Anatel's approval until 12/19/08.

 

 

 

 

CADE's Approval (deal)

 

Cade homologed in 12/10/2008 a deal with Oi which permits the incorporation of BrT while analyzes this trade, but set the following conditions:

1) Submit to Cade's analysis the purchase of licenses for broadband use (WiMax, 3G and MMDS).

2) Maintenance of the free internet supplier service and internet operations of both operators (IG and Oi Intenet) separately.


So, Oi will be able to incorporate BrT after getting Anatel's previews approval, what might happen this year.

 

 

The trade

 

The trade has the following characteristics:

  • Telemar Norte Leste, acquired Invitel, which controls Solpart Participações, controller of Brasil Telecom Participações. With the acquisition, Telemar will have 60.5% of the voting stock and 22.8% of the capital total of Brasil Telecom Participações.

     

  • The price was R$ 5.86 billion. There are still additional spendings with the obligation to buy shares of minorities (tag long) and of R$ 315 million for the extinction of the lawsuits among BrT partners.
  • The acquisition was done in name of "Credit Suisse" which took hole of "Commissioner" until overcame the regulation restrictions that prevent the process.
  • Telemar Participações, Oi's controller, operated a partnership Restructuring that resulted in the GP and Opportunity leaving. AG, La Fonte and Fundação Antlântico, became owners of 51% of the ordinary shares of Telemar Participações.
  • Telemar Participações approved the increase of capital in R$ 1,239 million which was subscribed by BNDESPAR.

 

1. Restructuring of Telemar Participações

 

Telemar Participações is the controller of Oi (TNL and Tmar).

 

 

Telemar's Partnership Structure

 

 

 

 

Shareholder Composition of Telemar Participações (before restructuring)

 

Company
Stake
Description
AG Telecom
10.3%
Andrade Gutierrez
La Fonte Tel.
10.3%
Grupo Jereissati
Asseca
10.3%
GP Investimentos and Macal
Fundação Atlântico
10.3%
Entity of complementary pension funds of Oi's workers
BNDESPar
25.0%
BNDES subsidiary
Fiago*
19.9%
Fcf Fund of Investment of Shares
Lexpart*
10.3%
Inepar Group
Alutrens*
10.3%
Banco do Brasil and Sul América

* Don't participate of the Telemar Participações' control as a result of their relationship of control with other Telecom operators in Brazil.

 

 

After the restructuring, Telemar Participações' shareholder composition became:

 

 

Shareholder Composition of Telemar Participações (after restructuring)

 

Company
Stake ON
Description
AG Telecom
19.34%
Andrade Gutierrez
La Fonte Tel.
19.34%
Grupo Jereissati
Fundação Atlântico
11.5%
Entity of complementary pension funds of Oi's workers
Subtotal
50.18%
 
BNDESPar*
16.86%
BNDES subsidiary
Previ
12.96%
 
Petros
10.0%
 
Funcel
10.0%
 
Total
100%
 

*Got 100% of the PN shares.

 

 

2. Brasil Telecom Acquisition

 

Telemar Norte Leste acquired Invitel, which controls Solpart Participações, controler of Brasil Telecom Participações.

 

 

Partnership Structure of Brasil telecom

 

Click to get the complete structureClique para ver estrutura completa

 

 

The acquisition was made in name of "Credit Suisse" which took hole as "Commissioner" until overcame the regulation restrictions that prevent the process.

 

The cost was of R$ 5.86 billion. There are still additional spendings with the obligation to buy shares of minorities (tag long) and of R$ 315 million for the extinction of the lawsuits among BrT partners.

 

With the acquisition, Telemar will have 60.5% of the voting stock and 22.8% of the capital total of Brasil Telecom Participações.

 

Public Offers (OPA) mandatory and voluntary will be carried out for the acquisition of shares from the involved companies.

 

 

3. Change in the Regulation

 

The General Law for Telecommunications establishes that:

"the transference of control or concession that results in, direct or indirect, control by the same shareholder or group of shareholders, of concessionaries operate in distinct areas of the general approval plan, won't be done while this impediment is considered necessary, by Anatel, to the plan compliance." (article 202)

The General Approval Plan establishes that:

"will be admitted only the transferences of concession or corporate control that contribute to reconciliation of the operation areas with Regions defined in this General Approval Plans and for the unification of corporative control in each Region." (article 7)

As Oi and BrT are concessionaries of fixed telephony in distinct regions of the General Approval Plan (PGO), there will be necessary to change this plan to make possible the merger between both companies.

 

 

Process Status: concluded PGO change

 

Steps for the PGO change:

 

- Public Consultation - OK

- Anatel's Council approves the text of the new PGO - OK (10/16/08)

- Advisory Board Council analyzes the text in 11/03/08 - OK

- Sending for the Brazilian President who approves it as a decree. (signed in 11/20/08) - OK

 

PGO Public Consultation

 

Anatel's Council approved in 06/12/08 the public consultation of the PGO(General Approval Plan) and of the PGR (General Plan for Regulation Updating).

 

The Public Consultation started in 06/17/08 and finished in 01/08/08.

 

With the proposed changes, Oi will be able to acquire BrT, but the company imposes new conditions to the concessionaires. By the main condition, the concessionaire of fixed telephony is required to operate only this service and no other.

Stakeholders

 

So, Oi is acquiring preference shares of Brasil telecom. through Copart. In 07/22/08 the company has also acquired 1/3 of the preference shares of BrT Participações and BrT through Voluntary Public Offering (OPA).

 

In 07/16/08, Oi announced that it had received a loan of R$ 4.3 billion from Banco do Brasil, to finance the future acquisition of the control of Brasil Telecom.

 

In 07/21/08, Oi informed to have gotten more R$ 3.6 billion to buy Brasil Telecom (BrT), through the emission of commercial promissory notes with four private banks: Itaú, Santander, Bradesco and ABN Amro.

 

 

4. Anatel and CADE's approval

 

Concluded the change in the regulation, Oi would have to send to Anatel a request of prior agreement for the acquisition of BrT. In this moment, Anatel can impose some conditions.

 

Then Anatel would prepare the process to be sent to CADE which can impose same conditions in order to preserve the competition in some market sectors such as fixed telephony and broadband.

 

CADE will hardly approve the merger before the conclusion of the process.

 

 

Check:

Telecom groups in Brazil

Oi alternatives?

Merger of Oi (Telemar) with BrT

Would Oi/BrT be a "Supertele"?

 

 

 

 

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