Mark Bagnall (AM Holt)
Dealmakers: Mark Bagnall
The Deal: Bagnall headed a White & Case team representing Oi S.A., Brazil’s largest telecommunications carrier, on the regulatory side of a $3.7 billion share offering. The primary goals of the offering were to finance a merger with Portugal Telecom SGPS S.A. through the acquisition of the latter company’s assets and to enhance the new company’s financial flexibility by substantially reducing debt.
Details: Oi and Portugal Telecom announced their intent to merge last October. At the time, Oi said it would need $6.39 billion, with $2.77 billion coming from assets and $3.17 billion to $3.63 billion from the market.
The share offering that closed April 28 exceeded the high end of Oi’s target range.
“We were brought in during the weeks before they made the announcement to advise them about what disclosures they would have to make publicly, then to help them with all the steps required with the Securities and Exchange Commission and with the underwriters to actually complete the transaction,” Bagnall said.
Analysts said the deal could turn Oi from a badly managed company with low liquidity and poor corporate governance to a well-managed company with better liquidity and better governance.
White & Case attorneys based in Miami, Sao Paulo, New York and London helped Oi negotiate guarantees for PT’s debt. The Sao Paulo attorneys dealt with Brazil’s regulatory commission, Comissao de Valores Mobiliares, and the Brazilian stock market, Bovespa.
“This was also characterized as a Brazilian offering but to investors outside Brazil,” Bagnall said. Therefore, the documents prepared for the SEC also were registered with Bovespa.
A minority shareholder group, Tempo Capital, opposed the offering because it would dilute its ownership stake. Before the offering, Oi had fewer than 1.8 billion common and preferred shares outstanding. CVM ultimately ruled the offering was proper, he said.
The share offer was suspended in March by CVM after Oi CEO Zeinal Bava spoke publicly during a designated quiet period. The suspension was initially for 30 days, but Oi got it reduced to five days, Bagnall said.
Conducting due diligence on the PT assets required help from the London office, which conducted extensive research into PT’s assets in Africa. PT was to trade its Portuguese and African assets for $2.5 billion worth of shares.
The underwriters were led by Banco BTG Pactual, which was advised by the New York and Sao Paolo offices of Cleary Gottlieb Steen & Hamilton, Brazil’s Machado, Meyer, Sendacz e Opice Advogados and the Portuguese firm of Miranda Correia Amendoeira & Associados.
In addition to White & Case, Oi relied on the Sao Paolo firm Barbosa Mussnich & Aragao as principle negotiator of the merger and the Portuguese firm of Servulo & Associados.
Telemar, Oi’s parent company, was represented by Eskenazi Pernidji Advogados in Rio de Janeiro.
PT’s U.S. counsel was Simpson Thacher & Bartlett in New York; Souza, Cescon, Barrieu e Flesch Advogados in Sao Paolo; and Garrigues in Madrid.
Quote: “The cash portion of this deal is being used to repay some of the debt of the combined company to delever the company and make it a better investment for its debtholders. If they delever, they’ll have more capacity to borrow money, to make future acquisitions or fund capital expenditures,” Bagnall said. “They’ll have more financial flexibility going forward.”
Background: Bagnall is a partner in White & Case’s capital markets practice group. He specializes in securities transactions involving Latin American companies. His Miami associates on the deal were Casey Furman, Mariana Seixas, Samuel Chaffin and Karen Katri.
Also assisting were Sao Paulo partner Donald Baker and associates John Guzman, Joana Cardozo and Lucy Haley; New York partners Ray Simon and Doug Baumstein and associates Jason Emala, Jonathan Michels, Elodie Gal and Stephen Gee, and London partner Gavin Weir.