Brazil's Oi raises nearly US$6bn ahead of merger

Brazilian telecoms operator Oi (NYSE: OIBR) has raised a total of 13.1bn reais (US$5.87bn) in a share offering.

The move was part of a capital increase ahead of Oi's merger with parent company Portugal Telecom (NYSE: PT). The total raised is slightly below the 14.1bn reais previously estimated by the companies, but Oi said that the number of shares initially offered may increase.

Oi's board approved a global offering of 2.14bn common shares, offered at 2.17 reais per share, and 4.28bn preferred shares, at 2 reais each, the company said.

"The aggregate cash proceeds of the offering to Oi, after underwriting discounts and commissions (before expenses), will be equivalent to approximately US$5.87bn, including the shares of PT Portugal SGPS S.A. that Portugal Telecom SGPS S.A. will contribute to Oi in the offering," the operator said.

Portugal Telecom subscribed for more than 1bn common shares and 1.7bn preferred shares, equivalent to 5.7bn reais.

Following the settlement of the transaction, Portugal Telecom will own, directly and indirectly, 37.41% of Oi's share capital, including 40.73% of Oi's voting share capital.

The offering will be registered in Brazil on May 2 and in the United States on May 5.

The capital increase, according to media reports, is said to be the largest in the Brazilian market since 2010, when Brazil's oil giant Petrobras raised around 120bn reais in a share offering.

The move is expected to help Oi capitalize and reduce its financial leverage and debt exposure. Oi is Brazil's fourth largest telecoms group, with around 18% of the market according to the latest figures from telecoms watchdog Anatel.

Once completed, the merger will create CorpCo, projected to become one of the largest telecoms groups in the world, with nearly 38bn reais (US$16.5bn) in combined revenues.