Portugal Telecom announced its merger with Brazilian affiliate Oi.
The merger, according to Portugal Telecom, is aimed at cost efficiency. The merger between Portugal Telecom and Brazilian affiliate Oi will create a carrier with about 100 million subscribers.
The combination will be through a capital increase at Oi. Oi will carry out a capital increase of at least 2.3 billion euros ($3.1 billion). PT will contribute in kind its assets and liabilities (excluding its direct and indirect holdings in Oi) for Oi shares, at the same price as the concurrent cash capital increase.
Zeinal Bava, who joined Oi as chief executive officer in June, will lead the combined entity, which will be incorporated in Brazil. Portugal Telecom also announced the new board structure.
The merger will generate cost savings and additional revenue valued at about 1.8 billion euros. The carriers have a combined market value of more than $7 billion, Bloomberg reported.
Oi and PT have 100 million customers. Their combined revenues, Opex and Capex will be R$ 37.5 billion, R$ 24.7 billion and R$ 8.6 billion, respectively.
“The merger will consolidate the position of both companies as the leading operator for Portuguese-speaking countries,” Portugal Telecom said.
The combined company will aim to achieve significant economies of scale, maximize operational synergies and add value for its shareholders, customers and employees.
As part of the transaction, each Portugal Telecom share will be exchanged into 0.9211 share of the enlarged company, called CorpCo.
Portugal Telecom owns 12.1 percent of the investor group known as TmarPart that controls Oi, and 19.4 percent of the Brazilian carrier’s non-voting shares.
The agreement has the backing of Portugal Telecom’s two biggest shareholders, Avistar and Nivalis Holding, according to a statement from Portugal Telecom.
The merged carriers had 2012 combined revenue of 12.4 billion euros and earnings before interest, taxes, depreciation and amortization of 4.2 billion euros.
