SÃO PAULO, Brazil â€" The Brazilian telecommunications carrier Oi raised about 8.25 billion reais ($3.7 billion) on Monday through a global share offering that is part of its merger with Portugal Telecom.
Oi priced its offering at 2.17 reais (97 cents) for each common share and 2 reais for each preferred share. The price was at the low end of the suggested range of 2 to 2.3 reais.
Including the overallotment for the underwriters, the company will have sold nearly 7 billion shares, a person with knowledge of the offering said. Approximately 40 percent of those shares were not used to raise money but were instead given to Portugal Telecom in return for the assets it is bringing to the merger.
When merger was announced last October, Oi said it would raise up to 14.1 billion reais, with 6.1 billion reais coming in the form of assets from Portugal Telecom, and between 7 and 8 billion reais coming in cash from the market.
As a result, the company raised slightly more cash on Monday than the high end of its original target range.
Oi’s share price has plunged in recent months, in part because of the extensive dilution of existing shareholders. Before the merger’s announcement last October, Oi only had 1.797 billion common and preferred shares outstanding.
Portugal Telecom’s shares have fallen too, but not nearly as much, with American depositary receipts in New York ending Monday trading at $4.23, compared to $4.55 before the merger was announced.
The combined company will have over 100 million subscribers and $17 billion in revenue, based on 2013 figures for the two companies. The money raised Monday will be used to pay down debt, according to the prospectus.
Robin Bienenstock, senior telecom analyst with Sanford Bernstein in London, said “there is much not to love about the deal, which was structured to be favorable to Oi’s controlling shareholders, but it is making the uninvestable investable.â€
She said the deal would turn Oi from a badly managed company with low liquidity, poor corporate governance, and an unwieldy balance sheet into a firm with a bigger float, better corporate governance, a slightly better balance sheet, and a very good management team.
Ms. Bienenstock said the deal’s price and its dilution of existing shareholders was “disappointing,†but the company was now in a position to participate in acquisitions, including a potential bid for Telecom Italia’s Brazil subsidiary, TIM.
The merger between Oi and Portugal Telecom has been contentious in Brazil, with some Oi minority shareholders claiming that Portugal Telecom’s assets were overvalued. They also said that the merger was unfairly diluting their ownership stakes, and that the deal is structured primarily to allow Oi’s controlling shareholders to pay off their debts.
Brazil’s various regulatory authorities all issued their approvals, though one minority shareholder, Tempo Capital in Rio de Janeiro, had filed an appeal last week with the C.V.M., Brazil’s securities regulator trying to cancel the offering.
The deal’s lead underwriter was BTG Pactual. Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Espirito Santo Investment Bank, and HSBC were global coordinators. Banco do Brasil Securities, Bradesco BBI, Caixa Banco do Investimento, Goldman Sachs, Itaú BBA, Morgan Stanley, and Santander were joint bookrunners, and XP Securities, Nomura, and BNP Paribas were co-managers.
