RIO DE JANEIRO, Oct. 2, 2013 /PRNewswire/ -- In compliance with
the provisions of art. 157, Section 4 of Law No. 6,404/76 (the
"Brazilian Corporations Law") and in accordance with CVM
Instruction No. 358/02, Oi S.A. ("Oi", Bovespa: OIBR3, OIBR4; NYSE:
OIBR and OIBR.C) informs its shareholders and the market in general
that, on this date, Oi, Portugal Telecom SGPS S.A. ("Portugal
Telecom"), AG Telecom Participacoes S.A. ("AG"), LF Tel SA ("LF"),
PASA Participacoes S.A. ("PASA"), EDSP75 Participacoes S.A. ("EDSP
75"), Bratel Brasil S.A. ("Bratel Brasil"), and also certain
shareholders of Portugal Telecom, in particular, Avistar, SGPS,
S.A. and Nivalis Holding B.V. entered into a Memorandum of
Understanding ("Memorandum of Understanding") which established the
basis and principles that will govern the negotiations of a
potential transaction involving Portugal Telecom, Oi and some of
their controlling shareholders to form a combined entity
("CorpCo"), which will unite the shareholders of Oi, Portugal
Telecom and Telemar Participacoes S.A. ("TelPart") and combine the
activities and businesses developed by Oi in Brazil and Portugal Telecom in Portugal and Africa, with the intention of consolidating
the industrial alliance between Oi and Portugal Telecom that was
established in 2010 and developed since that date (the "Industrial
Alliance") which will permit the acceleration of the development of
Oi in Brazil, leverage and enhance
the innovation capacity of Portugal Telecom and crystallize the
value of synergies (the "Transactions").
Highlights of the Transactions:
- The Transactions are expected to enable CorpCo to generate
operational and financial synergies, with a net present value of
approximately R$5.5 billion, and
benefit from increased scale and from its leading positions in the
Portuguese and Brazilian markets.
- CorpCo will apply to be listed on the Novo Mercado segment of
BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros
("BM&FBOVESPA"), the New York Stock Exchange ("NYSE") and the
NYSE Euronext Lisbon, with the aim of increasing liquidity,
diversifying of the shareholder base and adopting the highest
standards of corporate governance. CorpCo will have a widely held
shareholder base and will not have a controlling shareholder or
group of controlling shareholders.
- As part of the Transactions, Oi is expected to undertake a
share capital increase in the minimum amount of R$13.1 billion, with the goal of reaching
R$14.1 billion, due in part to the
contribution of the operations and business of Portugal Telecom,
and the remainder, in a minimum amount of R$7 billion, with the goal of reaching
R$8 billion, is expected to be in
cash, with a view toward improving the balance sheet flexibility of
CorpCo. The current shareholders of TelPart and an investment
vehicle managed and run by Banco BTG Pactual S.A., will participate
in the offering by placing a subscription order of approximately
R$2 billion.
- The shares of CorpCo's will be listed on the Novo Mercado
segment of the BM&FBOVESPA, on the NYSE Euronext Lisbon and on
the NYSE, and the shares of Oi will be exchanged for shares of
CorpCo, so that Oi becomes a wholly-owned subsidiary of CorpCo.
Each Oi shareholder shall be entitled to receive one new common
share of CorpCo for each Oi common share, and each Oi shareholder
shall be entitled to receive 1 new common share of CorpCo for each
1.0857 Oi preferred shares. The exchange ratios have been
determined based on the VWAP of Oi common and preferred shares over
the period of the last 30 calendar days.
- Based on 2012 reported full year financials of Portugal Telecom
and Oi, CorpCo had pro forma revenues of R$37.5 billion, EBITDA of R$12.8 billion and Operating Cash Flow of
R$4.2 billion. Pro forma for the
envisaged R$8.0 billion capital
increase, CorpCo's net debt was R$41.2
billion, as of June 30,
2013
- The Transactions will also involve the merger of Portugal
Telecom into CorpCo. As a result of such merger, the shareholders
of Portugal Telecom will receive common shares of CorpCo in number
equal to the number of these shares that will be held by Portugal
Telecom immediately prior to such merger.
- Zeinal Bava, CEO of Portugal Telecom from 2008 to 2013 and
current CEO of PT Portugal SGPS, S.A. ("PT Portugal") and of Oi,
will be CEO of CorpCo and its subsidiaries.
- The closing of the Transactions will be conditional, inter
alia, upon a series of events and approvals, such as the
approvals by the shareholders of the companies involved, as well as
the approvals by relevant regulatory authorities. The closing of
the Transactions is expected to occur in the first half of
2014.
Description of the Transaction, Objectives and
Benefits:
1. Objectives
of the Transactions
The proposed Transactions involve a combination of activities
and businesses of Portugal Telecom and Oi, which will be held by a
single company, CorpCo, which may either be Telpart or another
company constituted for this purpose. The following principles will
guide the Transaction:
(i)
the formation of a single large multinational company based in
Brazil;
(ii)
the continuity of operations under the trademarks of Oi and
Portugal Telecom in their respective regions of
operation, subject to unified control and management by CorpCo;
(iii)
the consolidation of the Industrial Alliance, enabling the
maximization of synergies, reduction of operational risks,
optimization of efficient investments and ensuring best
practices;
(iv)
the strengthening of the capital structure of the integrated
companies, facilitating their access to capital and financial
resources;
(v)
the consolidation of the shareholder bases of Telpart, Oi and
Portugal Telecom solely in common shares traded on the Novo Mercado
segment of the BM&FBOVESPA, the NYSE Euronext Lisbon and the
NYSE;
(vi)
the diffusion of CorpCo 's shareholder base, which, after the
implementation of the Transactions, will have no shareholder or
group of shareholders holding a majority of the capital;
(vii)
the adoption of best corporate governance practices of the Novo
Mercado segment of the BM&FBOVESPA; and
(viii)
the promotion of greater liquidity of the shares traded in the
markets.
Creation of a multinational telecoms leader
The combination of Oi and Portugal Telecom will create a
multinational telecom operator with operations covering countries
with a total population of 260 million people and more than 100
million clients. The combination of the groups will aim to achieve
significant economies of scale, maximize operational synergies and
add value for their shareholders, customers and employees.
Commitment to highest corporate governance
standards
The Transactions will be executed in order to consolidate the
industrial alliance established in 2010 between Oi and Portugal
Telecom. As part of the Transactions, CorpCo will apply to be
listed on the Novo Mercado segment of the BM&FBOVESPA and will
implement best-in-class corporate governance practices with one
type and class of shares, with equal voting and dividend rights for
all shareholders.
Unified management team led by Zeinal Bava
Zeinal Bava, CEO of Portugal Telecom from 2008 to 2013 and the
current CEO of PT Portugal as well as CEO of Oi, will head CorpCo
as its CEO and its subsidiaries.
Improved time to market to crystalize growth opportunities
in Brazil
The Transactions will allow CorpCo to leverage Oi's unique
footprint in Brazil and Portugal
Telecom's experience in the Portuguese market, thus allowing it to
crystalize the growth opportunities in convergence and mobility in
Brazil.
Commitment to financial discipline and value
creation
CorpCo will place a strong focus on excellence in integration
and operational practices. A clear plan for action has been
identified to integrate areas of potential efficiency. This
includes identified teams in place to capture synergies and address
existing operational challenges.
The Transactions may generate operational and financial
synergies estimated to have a net present value of approximately
R$5.5 billion.
CorpCo is committed to its financial discipline to improve the
flexibility of its balance sheet in order to reduce financial risk
and to underpin investment in future growth areas.
Return of activities to positive FCF during
2015
As a result of the Transaction, we estimate that the combined
activities of the companies will achieve positive free cash flow
generation in the second half of 2015.
2. Principal
Steps of the Transactions
The Transactions, in their current configuration, comprise,
among other things, the following corporate actions and steps that
are subject to refinement in the definitive agreements that will
govern the Transactions:
2.1. Oi Capital Increase
Oi proposes to undertake a capital increase in the minimum
amount, as of the date of this Material Fact, of approximately
R$13.1 billion, with the goal of
reaching R$14.1 billion, with the
approximate amount to be paid in cash of a minimum of R$7.0 billion, with the goal of reaching
R$8.0 billion, and the approximate
amount to be paid with assets of R$6.1
billion, to be conducted through the public issuance of
common shares and preferred shares of Oi, preferably in proportion
to the current ratio between the issued and outstanding common and
preferred shares of Oi (the "Oi Capital Increase"), it being agreed
that, in order to respect the legal limit for division of capital
between voting and non-voting shares (i.e., minimum of one third of
the shares entitled to vote and maximum of two thirds of shares
without voting rights), the number of issued shares of each type
may be adjusted. The Oi Capital Increase will be subject to the
full subscription of the minimum value of the portion to be paid up
in cash and will be subject to certain conditions, as described
below.
Portugal Telecom will enter into a commitment to subscribe and
pay for the portion of the Oi Capital. Increase to be paid for
through the contribution of assets (the "PT Assets"), through the
contribution of the share interests in companies that hold all of
(i) the operating assets of Portugal Telecom, except the equity
interests directly or indirectly held in Oi and Contax
Participacoes S.A., and (ii) the liabilities of Portugal Telecom on
the date of contribution. Under the Brazilian Corporations Law, the
PT Assets will be identified and subject to valuation by a
specialized company, whose valuation report will be submitted to
the General Meeting of shareholders of Oi.
Portugal Telecom estimates that the equity value of the PT
Assets, upon assessment for the purposes of the contribution to Oi,
correspond to a value within a range of values with a minimum of
€1.9 billion and maximum of €2.1 billion, equivalent to
R$5.8 billion and R$6.4 billion, respectively, based on the current
exchange rate of 3.0181 reais per euro. Portugal Telecom may
elect not to consummate the subscription of shares in the Oi
Capital Increase if the valuation report of the PT Assets values
the PT Assets in euros at a value lower than the estimated values
above, based on the exchange rate of euros to reais on the
date of the valuation report.
Current shareholders of TelPart and an investment vehicle
managed and run by Banco BTG Pactual S.A. have agreed to
participate in the offering by placing a subscription order for
shares of Oi of approximately R$2.0
billion.
The holders of common shares and preferred shares of Oi will
have priority in the subscription of the Oi Capital Increase.
TelPart, AG and LF will assign all of their respective priority
rights to Portugal Telecom free of charge.
Once the subscription period for the Oi Capital Increase is
closed, Portugal Telecom may elect not to consummate the
Transactions and all other corporate transactions related to the
Transactions if the percentage of the participation of Portugal
Telecom in CorpCo is equal to or less than 36.6% of the total
capital of CorpCo on a fully diluted basis after giving effect to
the merger of shares of Oi and CorpCo (as described below).
Additionally, TelPart may elect not to consummate the Transactions
and all other corporate transactions related to the Transactions if
the percentage of the participation of Portugal Telecom in CorpCo
is greater than 39.6% of the total capital of CorpCo on a fully
diluted basis after giving effect to the merger of shares of Oi and
CorpCo.
The other conditions of the Oi Capital Increase will be set
forth in the definitive agreements that will govern the
Transactions and will be disclosed on a timely basis to our
shareholders and the market in general.
2.2. Reorganization of TelPart, AG, LF and Bratel Brasil
As part of the Transaction, AG, LF and TelPart will be
capitalized with the resources needed to repay their indebtedness.
In addition, AG and LF and their intermediate holding companies
will be reorganized in order to separate the assets not related to
their direct or indirect shareholding in Oi, so that AG, LF, Bratel
Brasil and TelPart will not have assets or liabilities (or will
have cash or cash equivalents equal to their respective
liabilities), other than: (i) shares of TelPart and Oi, in the case
of AG; (ii) shares of TelPart and Oi, in the case of LF; (iii)
shares of AG, LF, TelPart and Oi, in the case of Bratel Brasil;,
and (iv) shares of Oi, held directly or indirectly, in the case of
TelPart.
Immediately after such capitalization, AG, LF and Bratel Brasil
will merge with and into TelPart. The shareholders of AG and LF
will receive, by virtue of the mergers set forth herein, the shares
held by AG and LF in TelPart, in accordance with the proportion of
their respective shareholding interests in the merged companies,
after the adoption of other measures included in the Transactions.
The changes in shareholding interests in AG, LF and TelPart arising
from the operations under the Transactions and the mergers will not
result in the transfer of control of any of these companies.
2.3. Listing of CorpCo on the Novo Mercado Segment
CorpCo will apply to be listed on the Novo Mercado segment of
the BM&FBOVESPA, with the aim of strengthening its corporate
governance through the adoption of a new management structure and
corporate governance regime.
CorpCo will have a Board of Directors consisting of eleven (11)
members and eleven (11) alternate members. Members of the Board of
Directors of CorpCo to be elected in anticipation of the listing of
CorpCo on the Novo Mercado segment and the Merger of Shares (as
defined below) will have a term of three (3) years from their
election or until the General Meeting of the shareholders of CorpCo
to examine the financial statements of CorpCo for the third fiscal
year ending after the close of the year in which the Merger of
Shares occurs, whichever occurs last. In order to facilitate the
integration of Oi and Portugal Telecom, the Board of Directors of
CorpCo shall initially consist of the following members: Alexandre
Jereissati Legey, Amilcar Morais
Pires, Fernando Magalhaes
Portella, Fernando Marques
dos Santos, Henrique Manuel Fusco
Granadeiro, Jose Maria
Ricciardi, Jose Mauro Mettrau Carneiro da Cunha,
Nuno Rocha dos Santos de Almeida, Rafael Luis Mora Funes, Renato Torres de Faria and Sergio Franklin Quintella.
Mr. Jose Mauro Carneiro da Cunha Mettrau and Henrique Manuel Fusco Granadeiro will assume the
positions of President and Vice President, respectively, of the
Board of Directors of CorpCo.
Immediately after the implementation of the corporate actions
described above, the Shareholders' Agreements of AG, LF and TelPart
entered into or amended as of January 25,
2011 will be terminated.
2.4. Merger of Shares and Portugal Telecom Merger
Merger of Shares (Incorporacao de Acoes)
of Oi and CorpCo
Following the transactions described above, Oi and CorpCo will
convene shareholders meetings to consider a merger of shares, with
a view to causing Oi to become a wholly-owned subsidiary of CorpCo
and to facilitate the migration of the shareholder base of Oi to
CorpCo (the "Merger of Shares"). At the effective time of the
Merger of Shares, CorpCo will have no assets or liabilities (or
will have cash equivalent equal to its liabilities), other than the
shares of Oi that it holds.
In the proposed Merger of Shares, holders of Oi common shares
will receive one new common share issued by CorpCo in exchange for
each common share of Oi that they hold, and holders of Oi preferred
shares will receive one new common share issued by CorpCo in
exchange for each 1.0857 preferred share of Oi that they hold. All
ratios in the mergers that are part of the Transactions were
established based on market prices of the shares of Oi in a period
of 30 days and considering the shares of Oi that the companies
involved in the operation directly or indirectly hold, assuming
that such companies will not hold any liabilities or assets (or
will have cash or cash equivalents equal to their respective
liabilities).
Holders of shares of Oi will not be entitled to withdrawal
rights in the proposed Merger of Shares under art. 137, II of the
Brazilian Corporations Law. Shareholders of CorpCo that dissent
from the resolution approving the proposed Merger of Shares will
have the right to withdraw from CorpCo, subject to the provisions
of art. 137 of the Brazilian Corporations Law, at a value per share
equal to the per share book value. However, we do not expect that
the shareholders of CorpCo will exercise their withdrawal
rights.
Pursuant to art. 137, Section 1 of the Brazilian Corporations
Law, dissenting shareholders who are entitled to withdrawal rights
may only exercise such rights in relation to the shares they hold
continuously as of the end of the trading day on October 1, 2013 to the date of exercise of the
right of withdrawal. Shares acquired on or after October 2, 2013 will not entitle their holders to
withdrawal rights with respect to the Merger of Shares. The
transfer of ownership of shares during the period set forth above
(including the holding of so-called "loaned" or "rented" shares)
will result in the loss to the respective shareholder of the
ability to exercise withdrawal rights in respect of the shares
transferred.
Portugal
Telecom Merger (Incorporacao)
Portugal Telecom will merge with and into CorpCo (the "Portugal
Telecom Merger") pursuant to art. 227 of the Brazilian Corporations
Law. As a result of the proposed Portugal Telecom Merger, Portugal
Telecom's assets will be transferred by operation of law to CorpCo.
The Portugal Telecom Merger will be submitted to the General
Meeting of shareholders of CorpCo for consideration in conjunction
with the Merger of Shares. In addition, the Portugal Telecom Merger
will be submitted for consideration to the General Meeting of
shareholders of Portugal Telecom. At the time of the proposed
Portugal Telecom Merger, Portugal Telecom will have no assets or
liabilities (or will have cash and cash equivalents equal to its
liabilities), other than shares of CorpCo. In the proposed Portugal
Telecom Merger, the shareholders of Portugal Telecom will receive a
number of common shares issued by CorpCo equal to the number of
common shares of CorpCo that will be held by Portugal Telecom
immediately prior to such merger.
3. Conditions to
Implementation, Approvals and Other Information about the
Transactions
In addition to the conditions described above, the consummation
of the Transactions, as well as all other corporate transactions
linked to the Transactions, are subject to the implementation of
various conditions, including the approval of the transactions that
may be agreed among the parties to the Memorandum of Understanding
by the competent governing bodies of each such party, the obtaining
of legal and regulatory authorizations, consents of creditors and
third parties, the valid and final consummation of the Oi Capital
Increase, and the agreement of the parties to the definitive
transaction agreements of the Transactions. Subject to the
fulfillment of conditions precedent that may be contractually
established, all steps of the Transactions will be undertaken as a
single transaction to ensure their full implementation, which will
be an essential condition for consummation of the Transactions and
the conclusion of the Industrial Alliance.
The public offering of shares in the Oi Capital Increase is
subject to due registration with the CVM. Given that the shares of
Portugal Telecom and Oi are registered with the U.S. Securities and
Exchange Commission ("SEC"), the issuance of shares for cash in the
Oi Capital Increase, the issuance of shares by CorpCo to Oi's
shareholders in the Merger of Shares, and the issuance of shares by
CorpCo to Portugal Telecom's shareholders in the Portugal Telecom
Merger will require registration with the SEC pursuant the U.S.
Securities Act of 1933, may be subject to securities registration
requirements in other jurisdictions. This Material Fact 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 jurisdiction.
The information required by CVM Instruction No. 319/99 will be
disclosed in the form of Material Facts by the time of the same
date as the call notice of the Oi shareholders meeting that will
deliberate on the Merger of Shares.
The Memorandum of Understanding will remain in force until
October 1, 2014 and may be extended
by the parties thereto.
Oi will keep its shareholders and the market informed of any
subsequent material events related to Transactions.
Rio de Janeiro,
October 2, 2013.
OI S.A.
Bayard
de Paoli Gontijo
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
jurisdiction.
This communication contains information with respect to (1) the
proposed capital increase and related public offering of common
shares and preferred shares by Oi, (2) the proposed merger of
shares (incorporacao de acoes) between CorpCo and Oi, and
(3) the proposed merger (incorporacao) of Portugal Telecom
with and into CorpCo.
Oi may file a registration statement (including a prospectus)
with the U.S. Securities and Exchange Commission (the "SEC") for
the offering of its common shares and preferred shares to be issued
in connection with its proposed capital increase. Before you
invest, you should read the prospectus in that registration
statement and other documents Oi has filed with the SEC for more
complete information about Oi and this offering. You may get these
documents for free by visiting EDGAR on the SEC Web site at
www.sec.gov. Alternatively, Oi will arrange to send you the
prospectus after filing if you request it by calling toll-free
1-855-672-2332.
In connection with the proposed merger of shares between CorpCo
and Oi and the proposed merger of Portugal Telecom with and into
CorpCo, CorpCo 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/or
Portugal Telecom, as applicable (other than non-U.S. persons as
defined in applicable rules of the SEC), and (2) other
documents regarding this 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 capital increase, proposed merger of shares and proposed
merger.
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 Telpart or Oi.
Special Note Regarding Forward-Looking Statements:
This communication contains certain forward-looking statements.
Statements that are not historical facts, including statements
about our beliefs and expectations, 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 TelPart, Oi, Portugal Telecom or CorpCo, 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 of
Oi 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 us, or persons acting on our 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 for 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, we 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 TelPart, Oi, Portugal Telecom or CorpCo
makes on related subjects in reports and communications TelPart,
Oi, Portugal Telecom or CorpCo file with the SEC.
OI S.A.
Bayard de Paoli Gontijo
Investor Relations Officer
+55 21 3131-2918
invest@oi.net.br
SOURCE Oi S.A.