Adviser urges investors in Brazil's Oi to endorse merger with Portugal Telecom
By Luciana Bruno
RIO DE JANEIRO, March 13 (Reuters) - An independent financial advisory firm will recommend that shareholders of Brazilian telecommunications company Grupo Oi SA approve a proposed merger with Portugal Telecom SA SGPS , documents obtained by Reuters showed on Thursday, even as the deal is stirring intense controversy.
Glass Lewis & Co, a New York-based firm hired to issue an independent opinion for minority shareholders, said the benefits of a combination between the companies outweigh the costs and current limitations in disclosure. The document will be presented at a March 27 shareholder meeting called to discuss and vote on the transaction.
The firm recommended minority shareholders, many of which have voiced concerns that the deal is dilutive for them, to endorse a capital increase of 8 billion reais ($3.4 billion) that will facilitate the combination, and approve a valuation of both companies' assets carried out by Banco Santander SA .
"Based on these factors and the unanimous support of the board, we believe shareholders should support the contemplated combination," the document said.
Oi's largest shareholders, most of them local groups and pension funds as well as Portugal Telecom, hope the move will give the struggling group more clout to compete inside Brazil with bigger rivals such as Spain's Telefonica SA, Telecom Italia SpA's TIM Participações SA and Mexico's America Movil SAB.
Portugal Telecom and Oi have been discussing how to tie up since the former bought 25 percent of Oi in 2010. The market value of both companies has fallen more than half over the past three years, a sign that investors bet that a merger would take place sooner or later.
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