Portugal Telecom shareholders seen accepting new Oi merger terms
LISBON, Sept 8 (Reuters) - Shares in Portugal Telecom rose in early Monday trading on expectation its shareholders will accept less favourable terms for a merger with Brazilian peer Oi, finalising a long-awaited deal following a debt debacle at the Portuguese firm.
Investors are due to vote on the new terms later on Monday.
In July, Portugal Telecom was forced to take a cut in its share of the company resulting from the merger with Oi to 25.6 percent from 38 percent after a holding company of the Espirito Santo banking family defaulted on nearly 900 million euros ($1.2 billion) it owed to the Portuguese firm.
Portugal Telecom had failed to inform Oi of the investment and assumed the unpaid debt under the reworked deal in July. Portugal Telecom (PT) and Oi combined their operating assets in May.
"At this point, the way the deal is structured, Portugal Telecom shareholders are better off voting for it, as that will allow them to directly own a stake in the new company," said Allan Nichols, senior analyst at Morningstar Equity Research.
"I think they'll support it. It's a lesser of two evils, but PT really shot itself in the foot with that loan."
Portugal Telecom and Oi announced plans to combine in October in a deal aimed at creating a stronger competitor in the Brazilian telecoms market, as well as cost savings that should help both companies reduce their debts.
Shareholder advisory firms Institutional Shareholder Services and Glass Lewis have both recommended Portugal Telecom shareholders to approve the reworked deal.
Shares in Portugal Telecom rose 4 percent in early trading while the broader market in Lisbon was flat. They have gained over 30 percent since bottoming out last month in the aftermath of the deal renegotiation. Continuación...