Tele Norte, Telemar Retreat for Second Day Following Portugal Telecom Deal

Tele Norte Leste Participacoes SA slid for a second session, extending its drop to 24 percent, after saying it will sell 12 billion reais ($6.8 billion) in stock to existing shareholders as part of Portugal Telecom SGPS SA’s agreement to buy a stake in Telemar Norte Leste SA.

Tele Norte, the parent of Telemar, Brazil’s biggest fixed- line telephone company, plunged 9.4 percent to 31.91 reais in Sao Paulo trading at 1:20 p.m. New York time. Tele Norte’s preferred, or non-voting shares, dropped 5.7 percent to 25.63 reais after falling 11 percent yesterday. Telemar preferred shares lost 5.5 percent, stretching their two-day decline to 14 percent.

Tele Norte plans to raise 12 billion reais by selling common shares for 38.55 reais and preferred, or non-voting, stock for 28.26 reais to existing shareholders, according to a regulatory filing yesterday. Telemar will also offer existing shareholders 12 billion reais in stock, selling common shares for 63.70 reais and preferred for 50.70 reais each.

The companies may raise less than they plan, Itau Unibanco Holding SA wrote in a note to clients today. Tele Norte will probably raise 2.5 billion reais at most because Portugal Telecom and Telemar Participacoes SA, which controls the company, may be the only investors who buy shares, Itau strategist Carlos Constantini said.

Portugal Telecom will pay a maximum 8.4 billion reais for indirect and direct stakes equivalent to 22 percent of Oi, as Telemar is known, the companies said yesterday in regulatory filings. Telemar also plans to acquire 10 percent of Portugal Telecom, replacing Telefonica SA as the Portuguese company’s biggest investor.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

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