UPDATE 2-Brazil's Oi prices offering at bottom of range ahead of merger

lunes 28 de abril de 2014 17:51 GYT

(Recasts to update with pricing results, background in paragraphs 1-6)

By Joan Magee and Guillermo Parra-Bernal

NEW YORK/SAO PAULO, April 28 (IFR/Reuters) - Grupo Oi SA took the biggest step yet toward combining with partner Portugal Telecom SGPS SA late on Monday by pricing Brazil's only share offering this year at the lowest price expected.

Oi, Brazil's largest fixed-line telephone carrier, priced a sale of preferred shares at 2 reais each, at the bottom of the suggested range set by bankers, two sources with direct knowledge of the deal said. The company had indicated a range of 2 reais to 2.30 reais for the preferred shares.

Common shares were priced at 2.17 reais, a premium of more than 8 percent to the preferred stock, said the sources, who declined to be identified because the transaction is underway. The sources said a pricing near the bottom of the range would allow the company to ensure strong demand for as many as 5.75 billion shares in the deal and allow banks to buy another 2 billion shares in supplementary and additional allotments.

Details on the size of the placement were not immediately available on the website of securities industry watchdog CVM. One of the sources said foreign investors bought about 85 percent of the offering, with the rest going to local institutional investors.

The sources expect the transaction to fetch at least 8 billion reais ($3.6 billion) from investors, helping Oi to reduce a stifling debt load.

The recapitalized Oi, which also controls Brazil's fourth-largest mobile phone carrier, plans to use its stronger balance sheet to form CorpCo, the proposed name of the company after the tie-up with Portugal Telecom.

Each Oi common share would be exchanged for 1 share in CorpCo and each Oi preferred share would be swapped for 0.9211 CorpCo share.   Continuación...