LISBON, Portugal (AP) — Portugal Telecom and Brazil's Oi announced Wednesday their intention to merge and create a company with combined 2012 revenues of 12.4 billion euros ($16.8 billion) and around 100 million customers.
The two companies together have a market value of around $7 billion (5.17 billion euros). Portugal Telecom shares jumped 11.1 percent by late morning on the Lisbon stock exchange, to 3.77 euros. PT is the largest shareholder in Oi, and the two companies have had an alliance since 2010.
The companies said in a statement they expected to conclude the merger by the middle of next year and that the new company will be called CorpCo . The merger will bring forecast net savings of 1.8 billion euros, the statement said, though it did not specify if that was a one-off saving or annual. PT officials did not immediately respond to a request for clarification.
The deal is subject to regulatory approval and a cash capital increase of up to 2.7 billion euros, with a minimum of 2.3 billion euros. The statement said Brazil-based CorpCo will benefit from greater economies of scale and will be the market leader in Brazil and Portugal.
Under the terms of the Memorandum of Understanding, and assuming the capital increase reaches the highest amount, PT shareholders will have a 38.1 percent stake in the new company. Zeinal Bava, the current CEO of Oi and PT Portugal, will be CEO of CorpCo and its subsidiaries.