Latest hiccup in Oi, BrT merger

4 Apr 2008

The proposed takeover of Brazilian fixed line operator Brasil Telecom (BrT) by rival firm Oi (formerly Telemar) is being threatened by an ongoing dispute between the former’s shareholders, Citigroup (a group of Brazilian pension funds) and Opportunity (a Brazilian investment firm that used to represent them in BrT and which retains a share of control over BrT). Although Oi has been striving for several months to acquire BrT for around USD2.8 billion, the Financial Times reports that a Brazilian investor is threatening to sue Citigroup if it settles its dispute with Opportunity. The UK paper writes that the pension funds dispensed with Opportunity’s services in 2003 and Citigroup followed suit in 2005 after ‘a series of revelations implicating the company and Daniel Dantas, its founder and manager, in alleged illegal activities.’ With Dantas being prosecuted for corruption and a number of other charges, Citigroup is also suing Opportunity in the New York courts for alleged negligence and fraud. However, news emerged last week that the pair could be close to resolving their differences which, if true, would allow Oi to fast-track the completion of the BrT takeover.

This has now been thrown into question once again though, after it was revealed that Luis Roberto Demarco, a former partner in Opportunity who has been embroiled in a series of legal disputes with the company, has threatened to sue Citigroup if it drops its lawsuit against Opportunity.

Brazil, Brasil Telecom (BrT), Oi