As expected, Portugal Telecom and Oi have been forced to revise the terms of their merger and have signed a new memorandum of understanding that will see PT hold a smaller stake in the merged company of 25.6 per cent.
In a statement, PT said the MoU was signed following the non-repayment by Rio Forte Investments SA (Rioforte), which is owned by Espírito Santo group, of the €847 million ($1.15 billion) matured portion of the outstanding €897 million Rioforte debt subscribed to by the PT group. The larger block matured on 15 July, while the smaller €50 million portion matures on July 17.
Oi has previously criticised PT for not disclosing this investment in advance of a capital raising exercise that was completed in May, in which PT participated
When the merger was first announced last October, the new CorpCo was expected to be around 38 per cent owned by PT shareholders. The stake will now be lower after the companies agreed to exchange the Rioforte debt with some so-called Oi ON shares and Oi Call shares, PT said in a statement today. The Espírito Santo group owns 10 per cent of Portugal Telecom.
Both PT and OI stressed that they are still committed to the "full completion of their business combination". The revised agreement is designed to "provide the time that may be necessary to minimise the loss in the value of the Rioforte debt, and "to allow for the completion of the business combination as soon as possible".
PT also said that it will pursue its legal options against Rioforte and "relevant related parties" to the full extent of the law in coordination with Oi.
"PT and Oi remain committed to completing the remaining steps of the business combination, which include the merger of shares of Oi into CorpCo and the migration to the 'Novo Mercado'," PT added.
The Novo Mercado is a section of the Sao Paulo Stock Exchange that sets higher corporate governance standards.
PT was also recently forced to defend its chief financial officer following negative press reports. The company said Luís Pacheco de Melo remains in office as an executive board member and CFO, and would in future focus exclusively on the PT and Oi business combination.
For more:
- see this PT statement
- see this Bloomberg article
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