Terms of the Exchange of Credits for Shares of Oi/TmarPart and the Option for
the Purchase of Shares in Treasury to be Submitted to the Governing Bodies of
Continuation of the Final Stages of the Corporate Reorganization
RIO DE JANEIRO, July 28, 2014
RIO DE JANEIRO, July 28, 2014 /PRNewswire/ -- Oi S.A. ("Oi," Bovespa: OIBR3,
OIBR4; NYSE: OIBR and OIBR.C) and Telemar Participacoes S.A., ("TmarPart") in
compliance with art. 157, §4 of Law No. 6,404/76 (the "Brazilian Corporation
Law") and the Brazilian Securities and Exchange Commission (Comissao de
Valores Mobiliarios – CVM) Instruction No. 358/02, in addition to the Material
Fact dated July 15, 2014, notifies their shareholders and the market in
general of the following regarding the terms of the agreements that may be
entered into between Oi, TmarPart and Portugal Telecom SGPS S.A. ("PT SGPS")
in relation to the financial investments in commercial paper of Rio Forte
Investments, S.A. (the "Commercial Paper").
On this date, Oi and PT SGPS determined the terms that will be included in the
definitive agreements and that will be submitted to the Board of Directors of
Oi and the shareholders' meeting of PT SGPS for approval, which, once such
approval has been obtained, will be entered into by PT SGPS and the companies
that became subsidiaries of Oi as a result of the transfer of PT SGPS assets
on May 5, 2014, that is, PT International Finance B.V. ("PT Finance") and PT
Portugal SGPS, S.A. ("PT Portugal" and, together with PT Finance, the "Oi
Subsidiaries"), as well as Oi and TmarPart and will establish the terms and
conditions that may govern the transactions agreed upon by Oi and PT SGPS in
connection with the financial investments in the Commercial Paper (the
The Definitive Agreements provide for: (i) an exchange whereby the Oi
Subsidiaries will transfer to PT SGPS the Commercial Paper, and in exchange PT
SGPS will transfer to the Oi Subsidiaries common and preferred shares of Oi
(or of TmarPart, in the event that the exchange occurs after the merger of
shares of Oi into TmarPart (the "Merger of Shares")); and (ii) the granting by
the Oi Subsidiaries to PT SGPS of a call option to repurchase shares of Oi.
Main terms of the Exchange Agreement and Other Covenants (the "Exchange
The Oi Subsidiaries and PT SGPS will conduct an exchange whereby PT SGPS will
transfer to the Oi Subsidiaries unencumbered shares of Oi corresponding to
474,348,720 Oi common shares and 948,697,440 Oi preferred shares (the
"Exchanged Shares"); and Oi, as compensation, will transfer the Commercial
Paper to PT SGPS, in the total principal amount of €897 million, with no
additional consideration (the "Exchange").
Because this transaction involves shares that will be placed in Oi's treasury,
the implementation of the Exchange is subject to CVM authorization of (a) the
receipt of the Exchanged Shares by the Oi Subsidiaries; (b) the maintenance of
Oi shares (and, after the Merger of Shares, of TmarPart shares) in treasury,
in an amount equal to the maximum number of Exchanged Shares; and (c) the
granting of the call option by the Oi Subsidiaries to PT SGPS, in an amount
equal to the maximum number of Exchanged Shares.
The Exchange, which includes the transfer of the Exchanged Shares to the Oi
Subsidiaries and the transfer of the Commercial Paper to PT SGPS, shall be
concluded in up to three business days after the date of CVM approval.In
accordance with the Definitive Agreements, in the event that the Exchange is
not approved by March 31, 2015, none of the parties will be obligated to
consummate the Exchange.
Main terms of the Call Option for the Purchase of Shares ("Option Contract")
Pursuant to the Option Contract, the Oi Subsidiaries will grant to PT SGPS an
option (the "Option") to acquire 474,348,720 common shares and 948,697,440
preferred shares of Oi (or the corresponding number of shares of TmarPart
after the Merger of Shares (the "Shares Subject to the Option")).
The Option may be exercised, in whole or in part, at any time, pursuant to the
following terms and conditions:
(i) Term: Six years, it being noted that PT SGPS's right to exercise the
Option on the Shares Subject to the Option will be reduced by the percentages
Date of Reduction % of Shares Subject to the Option that cease
to the subject to the Option each year
From the 1st anniversary of the 10%
From the 2nd anniversary of the 18%
From the 3rd anniversary of the 18%
From the 4th anniversary of the 18%
From the 5th anniversary of the 18%
From the 6th anniversary of the 18%
(ii)Exercise Price: R$1.8529 per preferred share and R$2.0104 per common
share of Oi (and, as the case may be, R$2.0104 per common share of TmarPart),
as adjusted by the Interbank Certificate of Deposit (Certificado de Deposito
Interbancario) rate, (the "CDI rate"), plus 1.5% per annum, calculated pro
rata temporis, from the date of the Exchange to the date of the effective
payment of each exercise price, in whole or in part, of the Option. The
exercise price of the Option shall be paid in cash on the date of the transfer
of the Shares Subject to the Option.
Neither Oi nor TmarPart is required to maintain the Exchanged Shares in
treasury. In the event that PT Portugal, PT Finance and/or any of Oi's
subsidiaries do not hold, in treasury, a sufficient number of Shares Subject
to the Option to transfer to PT SGPS, the Option may be financially settled
through payment by the Oi Subsidiaries of the amount corresponding to the
difference between the market price of the Shares Subject to the Option and
the respective exercise price corresponding to these shares.
Whenever the Option is exercised, PT SGPS will undertake its best efforts to
integrate the shareholder bases of PT SGPS and TmarPart in the shortest time
While the Option is effective, PT SGPS may not purchase shares of Oi or
TmarPart, directly or indirectly, in any manner other than by exercising the
Option. PT SGPS may not transfer or assign the Option, nor grant any rights
under the Option, including security, without the consent of Oi. If PT SGPS
issues, directly or indirectly, derivatives that are backed by or referenced
to Oi or TmarPart shares, it shall immediately use the proceeds derived from
such a derivative transaction, directly or indirectly, to acquire the Shares
Subject to the Option.
Oi may terminate the Option if (i) the Bylaws of PT SGPS are amended
voluntarily to remove or amend the provision that limits the voting right to
10% of all votes corresponding to the capital stock of PT SGPS; (ii) PT SGPS
directly or indirectly engages in activities that compete with the activities
of Oi or its subsidiaries in the countries in which they operate; (iii) PT
SGPS violates certain obligations under the Option Contract.
The Option shall only become effective and in full effect after the
consummation of the Exchange and will terminate automatically if the Exchange
is not consummated by March 31, 2015.
Other information regarding the Transaction, corporate approval and business
combination of Oi and Portugal Telecom
The terms and conditions of the Exchange Agreement and the Option Contract
were agreed upon by the Board of Executive Officers of Oi and the Board of
Directors of PT SGPS and approved on this date by the Board of Directors of PT
SGPS. The execution of the Definitive Agreements and the consummation of the
Exchange and the Option described above are subject to certain conditions,
including, among others, corporate approvals, approval by the Board of
Directors of Oi and by the shareholders' meeting of PT SGPS.
The following will be submitted for approval by a prior meeting of the
shareholders of TmarPart and by the Board of Directors of TmarPart and PT
SGPS: (i) the amendment of the bylaws of TmarPart to include a limitation of a
maximum 7.5% of the voting rights (I) of PT SGPS, and (II) of any shareholder
that, as a result of the distribution of shares of TmarPart by PT SGPS to its
shareholders, results in a shareholding greater than 15% of the shares
representing the total capital stock of TmarPart, excluding the shares of
TmarPart previously held or that will be acquired by other means; (ii) the
amendment of the terms and other provisions of the amendments to the
shareholders' agreements, of the provisional commitment to vote and the terms
of termination of the shareholders' agreements; each of which agreements were
executed on February 19, 2014.
Other than the limitation on voting described above, the TmarPart bylaws will
not contain any other limitations on shareholders' voting rights that are
applicable due to their shareholding position in TmarPart.
The parties intend to develop a new structure to integrate the shareholder
bases of PT SGPS and TmarPart, and the first Board of Directors of TmarPart
elected in preparation for its migration to the Novo Mercado segment of the
Sao Paulo Stock Exchange (BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e
Futuros – BM&FBOVESPA) shall consist of: Antonio Gomes Mota, Fernando
Magalhaes Portella, Fernando Marques dos Santos, Paulo Jose Lopes Varela, Jose
Mauro Mettrau Carneiro da Cunha, Rafael Luis Mora Funes, Renato Torres de
Faria, Rui Horta e Costa, Sergio Franklin Quintella, Thomas C. Azevedo
Reichenheim and Vitor da Conceicao Goncalves.
Oi reiterates that the Definitive Agreements, when executed, will enable the
continued implementation of the business combination and the merging of the
shareholder bases of Oi and PT SGPS in order to migrate TmarPart to the Novo
Mercado segment of the BM&FBOVESPA, with the highest standards of corporate
governance, increase in liquidity, with dispersed ownership in the market and
the acceleration of synergies created by the transaction.
Oi will keep its shareholders and the market informed of any material
subsequent events related to the topics discussed in this Material Fact.
Rio de Janeiro, July 28, 2014.
Bayard De Paoli Gontijo
Chief Financial Officer and Investor Relations Officer
Telemar Participacoes S.A.
Fernando Magalhaes Portella
Investor Relations Officer
Additional Information and Where to Find It:
This communication is not an offering document and does not constitute an
offer to sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval in any jurisdiction in which distribution
of an offering document or such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of that
This communication contains information with respect to (1) the proposed
merger of shares (incorporacao de acoes) between TmarPart and Oi, and (2) the
proposed merger (incorporacao) of Portugal Telecom with and into TmarPart.
In connection with the proposed merger of shares between TmarPart and Oi and
the proposed merger of Portugal Telecom with and into TmarPart, TmarPart plans
to file with the SEC (1)one or more registration statements on Form F-4,
containing a prospectus or prospectuses which will be mailed to shareholders
of Oi and Portugal Telecom (other than non-U.S. persons as defined in
applicable rules of the SEC), and (2)other documents regarding the proposed
merger of shares and proposed merger.
We urge investors and security holders to carefully read the relevant
prospectuses and other relevant materials when they become available as they
will contain important information about the proposed merger of shares and
Investors and security holders will be able to obtain the documents filed with
the SEC regarding the proposed mergers, when available, free of charge on the
Commission's website at www.sec.gov or from TmarPart, Oi or Portugal Telecom.
Special Note Regarding Forward-Looking Statements:
This communication contains certain forward-looking statements. Statements
that are not historical facts, including statements regarding the beliefs and
expectations of TmarPart, Oi or Portugal Telecom, business strategies, future
synergies and cost savings, future costs and future liquidity are
forward-looking statements. The words "will," "may," "should," "could,"
"anticipates," "intends," "believes," "estimates," "expects," "plans,"
"targets," "goal" and similar expressions, as they relate to TmarPart, Oi or
Portugal Telecom, are intended to identify forward-looking statements and are
subject to a number of risks and uncertainties. There is no guarantee that the
expected events, tendencies or expected results will actually occur. Such
statements reflect the current views of management TmarPart, Oi or Portugal
Telecom and are subject to a number of risks and uncertainties. These
statements are based on many assumptions and factors, including general
economic and market conditions, industry conditions, corporate approvals,
operational factors and other factors. Any changes in such assumptions or
factors could cause actual results to differ materially from current
expectations. All forward-looking statements attributable to TmarPart, Oi,
Portugal Telecom or their affiliates, or persons acting on their behalf, are
expressly qualified in their entirety by the cautionary statements set forth
in this paragraph. Undue reliance should not be placed on such statements.
Forward-looking statements speak only as of the date they are made. Except as
required under the U.S. federal securities laws and the rules and regulations
of the SEC or of regulatory authorities in other applicable jurisdictions,
TmarPart, Oi, Portugal Telecom and their affiliates do not have any intention
or obligation to update or to publicly announce the results of any revisions
to any of the forward-looking statements to reflect actual results, future
events or developments, changes in assumptions or changes in other factors
affecting the forward-looking statements. You are advised, however, to consult
any further disclosures TmarPart, Oi or Portugal Telecom make on related
subjects in reports and communications TmarPart, Oi or Portugal Telecom file
with the SEC.
SOURCE Oi S.A.
Contact: Patricia Frajhof, +55-11-3131-1315, email@example.com
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