Oi SA reversed an earlier decline, joining a rally for Brazilian equities, after shareholders approved a capital increase of as much as 14.1 billion reais ($6.1 billion) to cement a merger with Portugal Telecom SGPS SA.
Oi’s preferred shares rose 0.9 percent to 3.22 reais at 2:31 p.m. in Sao Paulo as Brazil’s Ibovespa Index climbed 2.6 percent. They had dropped as low as 3.01 reais earlier, the lowest intraday price since September 1998.
Investors approved every measure in a meeting today in Rio de Janeiro over the objections of shareholders such as Tempo Capital and Leblon Equities. While it dilutes the value of Oi stock, the deal will pay off 4.5 billion reais in the controlling group’s debt, an arrangement the minority holders have called unfair.
Oi Chief Executive Officer Zeinal Bava is pushing for the merger to help the phone carrier compete with America Movil SAB and Telefonica SA in Brazil. The deal would allow Oi and Portugal Telecom to create a company with more than 100 million subscribers.
“We took an important step today on the path towards building the new company,” Bava told reporters at the shareholder meeting. “Now we have to confront the challenge of the market. We have an important capital raise, this wasn’t our final goal today. We still have work to do.”
About 88 percent of shareholders eligible to vote and present at the meeting voted in favor of the measures. About 75 percent of all eligible voters attended.
Oi shares tumbled the most since October yesterday after Brazil’s securities regulator sided with majority shareholders, and extended those declines today, reaching an almost 16-year low. The stock rebounded as the Ibovespa rose the most of major indexes in the Americas.