Telemar, BrT shareholders to ‘swap’ stakes

25 Jan 2008

Investors in Brazilian telecoms groups Telemar Norte Leste (Oi) and Brasil Telecom (BrT) are considering moves to swap their stakes in each other, in a move which could precipitate a merger of the two companies, Bloomberg reports. It is understood that the holding companies Zain Participacoes and Argolis Participacoes – which own indirect stakes in both telcos – will trade assets to enable each of them to focus solely on investing in one company. The plan was unveiled in a regulatory filing yesterday and increases speculation that Telemar could be looking to acquire BrT. Earlier this year, Telemar shareholders said they were in talks to acquire Brazil’s third largest fixed line operator and although BrT refuted the rumours, Telemar subsequently announced it was looking to sell around BRL4 billion (USD2.3 billion) worth of four-year bonds on the domestic market to help fund its proposed takeover.

Bloomberg writes that Zain, which indirectly controls BrT, will spin off its 16% stake in Argolis and transfer the shares to the company, which indirectly controls Telemar. In exchange, Argolis will cancel shares it owns in Zain and issue new shares that will be given to Zain shareholders. Zain owns 68% of Solpart, which in turn owns 51% of BrT’s voting shares. The asset swap increases the likelihood that Telemar’s shareholders will take control of BrT by acquiring Zain for BRL4.8 billion instead of Solpart, a local analyst is quoted as saying.

Brazil, Brasil Telecom (BrT), Oi