Oi Rallies on Share Sale Outlook in Portugal Telecom Merger

Oi SA (OIBR4) rose to a three-month high amid speculation that minority stockholders will get more favorable treatment when the company sells shares as part of its merger deal with Portugal Telecom SGPS SA.

The wireless carrier’s shares jumped 5 percent to 4.22 reais at the close of trading in Sao Paulo, the highest since Oct. 16. It was the best performer on the Ibovespa stock benchmark, which climbed 0.8 percent. Portugal Telecom fell 1.1 percent to 3.56 euros in Lisbon.

Oi’s minority owners have criticized the planned share sale, a capital increase needed to complete the merger, citing concern the value of their stock would be diluted while some of the controlling owners use the money to pay off debt. Brazil’s securities regulator CVM said in a preliminary recommendation that the majority holders shouldn’t be allowed to participate in pricing the assets, according to a document obtained by Bloomberg News from minority shareholder Tempo Capital.

The shares are climbing on speculation that Oi’s controlling shareholders are “no longer going to be able to just take care of their own interests,” Pedro Galdi, the head strategist at brokerage firm SLW Corretora in Sao Paulo, said by phone. “It gives minority shareholders a chance to act, and it gives strength to the stock.”

Oi’s press office declined to comment. The company’s controlling shareholder group, known as TmarPart, didn’t immediately respond to a request for comment when contacted by Bloomberg News.

In October, Rio de Janeiro-based Oi agreed to combine with Portugal Telecom to create a trans-Atlantic carrier with almost $17 billion in revenue. Shareholders of Oi will own the majority of the combined company after the transaction, which requires the Rio de Janeiro-based carrier to sell new stock for as much as 2.7 billion euros ($3.7 billion).

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Christiana Sciaudone in Sao Paulo at csciaudone@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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