oi to petrobras minority holder battles erase billions - bloomberg business

8/18/2019 Oi to Petrobras Minority Holder Battles Erase Billions - Bloomberg Business

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http://www.bloomberg.com/news/articles/2014-04-08/oi-to-petrobras-minority-holder-battles-erase-billions

Oi to Petrobras Minority Holder Battles

Erase Billions

Minority shareholders in Brazil are escalating a fight for fair treatment. So far, they’re losing.

Securities regulator CVM last month sided with Oi SA controlling shareholders in a dispute over a 14.1

billion-reais capital increase preceding a merger with Portugal Telecom SGPS SA. The board of state-run

oil producer Petroleo Brasileiro SA remains dominated by government officials even after minority holders

won a second seat last week.

The two companies underscore the struggles for small holders in Brazil, where recent activist efforts have

failed to dent the traditional clout of large families and investor groups, said Joao Nogueira Batista, chief

executive officer of the Mergers & Acquisitions Committee. CVM’s ruling in the Oi case will dilute the

stock and helped push its market value loss to $1.3 billion since October.

“It calls into question what rights minority shareholders have in investing in Brazil overall,” said Walter

Piecyk, an analyst with BTIG LLC in New York, citing the Oi ruling. “It sends a very poor message.”

Tempo Capital, which led the fight to block the Oi-Portugual Telecom merger, said the CVM’s March 25

ruling was a step backward for the regulation of Brazilian capital markets.

The decision “sheds light on the need to create stronger and more effective mechanisms to protect Brazilian

minority shareholders and higher corporate governance standards,” Tempo said in a statement.

Controlling shareholder Telemar Participacoes SA didn’t return e-mail requests for comment. Oi declined t

comment in an e-mail. CVM declined to comment.

Stand Up

Brazil’s biggest phone company, Oi plunged 11 percent the day after the ruling and has declined 33 percen

since the merger was announced Oct. 2.

April 8, 2014 — 10:33 AM EDT

Christiana Sciaudone and Julia Leite

http://www.bloomberg.com/http://www.bloomberg.com/http://www.bloomberg.com/news/articles/2014-03-26/oi-shareholders-cleared-for-brazil-capital-increase-vote


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http://www.bloomberg.com/news/articles/2014-04-08/oi-to-petrobras-minority-holder-battles-erase-billions

Oi’s “minority shareholders saw how the CVM didn’t stand up for their rights,” Piecyk said.

Minority investors had fought to block controlling shareholders from voting on the capital increase and the

valuation of assets involved in the merger because the deal involves paying off 4.5 billion reais in the

controlling group’s debt in addition to diluting holdings.

At the time of the decision, CVM said most of its board agreed that the issue should be voted on during theshareholder meeting and on those grounds majority investors couldn’t be prevented from voting. The board

also said that there weren’t enough elements to prohibit the controlling shareholders from voting, accordin

to the decision posted on CVM’s website.

Petrobras Tumbles

Petrobras has tumbled 55 percent since 2010, the year stakeholders fought to stop a $70 billion share sale,

and as investors try to raise a government-set fuel price cap that contributed to 17.7 billion reais in refininglosses last year. Petrobras rose 0.12 percent to 16.48 reais at 11:30 a.m. in Sao Paulo trading today.

As more foreign investors are lured to Brazil, demands for better corporate governance are also rising, said

Cristiano Guerra, head of Latin America and U.S. research for ISS.

“It’s essentially growing pains in many cases,” Guerra said by telephone from Rockville, Maryland. “Most

companies are still controlled by large families, by large groups, but as minority shareholders are growing

numbers we’re seeing a lot of these regulations and laws need to be tweaked.”

No Clout

Small investors in Petrobras, which is shouldering billions of dollars in fuel-subsidy losses, have failed to

sway the government to raise gas prices, while independent investors are locked in a power struggle with

HRT Participacoes em Petroleo SA over control of the board. CVM also ruled against minority shareholde

in cases including drink-maker Interbrew’s merger with Cia. de Bebidas das Americas, now known as

Ambev SA, in 2004. Petrobras and HRT declined to comment via e-mail. Ambev declined to comment.

Sugar-cane processor Cosan SA and steelmaker Usinas Siderurgicas de Minas Gerais SA have also been

pulled into disputes with minority shareholders in the past 13 years since laws were first changed to protec

investors, and the Novo Mercado, a listing body for companies committed to better corporate governance

practices, was created. Usiminas declined to comment via e-mail. Cosan didn’t return a request for comme

via e-mail.

http://www.bloomberg.com/news/articles/2014-04-02/aberdeen-led-minority-investors-win-second-petrobras-board-seathttp://www.bloomberg.com/news/articles/2010-09-24/petrobras-raises-70-billion-in-world-s-largest-share-sale-to-fund-fields


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oi to petrobras minority holder battles erase billions - bloomberg business

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