Oi SA (NYSE:OIBR): The Future Of The Merger

Boston, MA, 03/25/2014  (usastockreports) – Oi SA (ADR) (NYSE:OIBR) is looking forward for a positive outcome on March 27 shareholder meeting. The objective of the meeting is to discuss and vote on the proposed merger of Oi SA with Portugal Telecom, SGPS (ADR) (NYSE:PT). In the latest developments the company has moved one step ahead in the proposed merger as it is now confirmed that Autoridade da Concorrencia, the regulatory body of Portugal has approved the tie-up. The Brazilian Equivalent Cade has already approved the merger in February. With the approval coming from the Portugal regulatory body the deal is seen finalizing from both the parties.

A step ahead

The good news for the proposed merger is that in the bondholders meeting of PT, 99.96% of votes came in the favor of the deal. Now the next hurdle lies in the shareholders meeting. Apart from voting the issues that will be considered in the meeting are the proposed capital increase and the assessment of PT’s assets. The price for the share offer will be decided on a later date in month of April. The minority shareholders of Oi SA (ADR) (NYSE:OIBR) are not in the support of the deal as they see the deal as dilutive for them.

Support from banks

Oi SA (ADR) (NYSE:OIBR) has received a confirm nod from 14 Brazilian banks to buy USD2.5 billion of stock in its share offering. The 14 banks includes the five Brazil banks Credit Suisse Group AG (ADR) (NYSE:CS), BTG Pactual SA, Barclays Bank PLC (ADR) (NYSE:BCS), Espirito Santo Investment Bank and Bank of America Merrill Lynch who have committed to purchase the shares if deal gets muted response from the investors.

Impact

The merger of Oi SA with Portugal will bring positive outcomes for both the companies which are dealing with high debt problems from last many years. Oi SA debt-to-equity ratio is very high with a quick ratio of 0.69 making it a company with higher debt levels and lesser funds to cover its short term liquidity needs. Also Oi SA has several other issues in the base structure including deteriorating value of earnings per share, falling net income, poor return on equity and others. All these factors have drastically affected the share price of Oi SA (ADR) (NYSE:OIBR) in last few years.

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