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Claro, Vivo and Oi to Close Deal to Buy TIM

10/31/2014 - 09h02

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JULIO WIZIACK
FROM SÃO PAULO

Claro and Vivo companies, along with Oi, signed an agreement with BTG Pactual to buy TIM Brazil, the second largest company in the Brazilian market, and split the company into three.

The value is not closed yet, but it may reach US$ 13 billion (R$ 31.5 billion), the largest business deal in the country. There are about US$ 12.4 billion (R$30 billion), plus a 5% premium paid to shareholders, including minority shareholders.

Folha was able to learn that an offer will be made to shareholders of Telecom Italia, owner of TIM Brazil, who will decide on a general assembly of shareholders.

Under the agreement, Claro should have 40% of TIM. The other 60% will be split between Vivo (32%) and Oi (28%).

Main shareholders, such as the French Vivendi, are likely to accept. It is not yet defined what will happen with customers.

The delivery of the proposal is subject to the sale, by Oi, from Portugal Telecom (PT) in Portugal; a deal expected to be finalized next week.

According to research carried out by Folha, five parties are interested. Among them are two operator companies -the French Altice is one of them- and three are investment funds.

The value of this transaction will be around US$ 8.8 billion (R$22 billion), discounting debt and including a premium for control. With the money, Oi will reduce its debt to pay its share in the TIM offer.

In conversations with BTG Pactual, Telecom Italia said that TIM Brazil is not for sale and made a counteroffer: a merger with Oi.

However, they would enter the deal if they take over the new company. For that, they would pay up to US$ 1.2 (R$3) per share to Oi shareholders, almost double its market value.

Another condition from Telecom Italia was to be able to see Oi documents, to prevent possible unpleasant "surprises" as for example the discovery made by Oi itself while in the merging process with Portugal Telecom (PT).

After due diligence in the accounting of the two companies, a "loan" of US$ 1.12 billion (R$ 2.6 billion) was made by PT to Rio Forte on the eve of the merger. The company, belonging to the Espirito Santo Group, Oi's Partner, went bankrupt.

BTG responded to Telecom Italia that it could only negotiate the purchase of TIM Brazil and they said they had to submit a business proposal.

While denying TIM's sale, Telecom Italia's president, Marco Patuano, has said it all depends on the "check value."

In case of selling, part of the funds would be invested in Telecom Italia to enable the TV offer, the focus of his new partner, Vivendi.

Translated by CRISTIANE COSTA LIMA

Read the article in the original language

Editoria de Arte/Folhapress

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