Oi SA, Brazil’s fourth largest wireless carrier, which is currently in bankruptcy protection, today announced that it has accepted a binding offer from Globenet Cabos Submarinos SA (GlobeNet), BTG Pactual Economia Real Fundo de Investimento em Participações Multiestratégia and other investment funds of BTG Group for their acquisition of a 57.9% equity interest held by Oi SA in Brasil Telecom Comunicação Multimídia SA, the company’s fiber optic infrastructure assets (SPC InfraCo). Notably, GlobeNet is owned by BTG Pactual’s Infrastructure Fund II and thus we will refer to the ultimate owner of SPC InfraCo as solely BTG.

Overall, the offer from BTG values SPC InfraCo at an enterprise value of R$20.0bn ($3.5bn U.S. dollars). Factoring-in SPC InfraCo’s R$4.1bn ($723m U.S. dollars) of net debt, implies a valuation for SPC InfraCo’s equity at R$15.9bn ($2.8bn U.S. dollars).

Transaction Structure – SPC InfraCo, GlobeNet, BTG

BTG is purchasing a 57.9% equity interest in SPC InfraCo, with Oi SA holding the remaining 42.1% ownership interest. Through three separate cash payments and a merger with GlobeNet, BTG is providing Oi SA with aggregate consideration of R$12.9bn ($2.3bn U.S. dollars).

Cash Payments from BTG to Oi SA

  1. Primary Installment: at closing, BTG will acquire 17.1% of SPC InfraCo, for R$3.3bn ($576m U.S. dollars)
  2. Secondary Installment: at closing, BTG will acquire 33.9% of SPC InfraCo, for R$6.5bn ($1.1bn U.S. dollars). This will be paid in up to three annual installments, one of which is upon closing
  3. Additional Primary Installment: within 90 days of closing, BTG will acquire 3.8% of the newly merged SPC InfraCo (see below), for R$1.6bn ($285m U.S. dollars). This represents 7.2% of SPC InfraCo on a fully-diluted basis

Merger of GlobeNet with SPC InfraCo

Within 90 days from the closing date, BTG’s GlobeNet will merge with and into Oi’s SPC InfraCo. Overall, the fair value of GlobeNet for the purposes of the merger will be R$1.5bn ($267m U.S. dollars).

Finally, through this merger, BTG will be receive an additional 3.1% ownership interest in the newly merged business (6.8% fully-diluted). Following completion of the three separate payments and merger, BTG will own a 57.9% equity interest in SPC InfraCo.

Oi SA Fiber Infrastructure – Overview

Oi SA owns the largest fiber optic network in Brazil, with more than 250k miles (400k kilometers) of fiber optic cable throughout the country.

As of year-end 2020, Oi SA’s fiber network passed 9.1 million homes with fiber-to-the-home (FTTH) technology. Additionally, the company had 2.1 million fiber broadband customers. Therefore, the company’s fiber penetration rate equates to 23%. Notably, the company offers fiber-to-the-home (FTTH) in over 125 cities throughout Brazil.

Additionally, Oi SA operates a nationwide long-haul backbone, through its optical fiber transport network. Specifically, this long-haul network covers more than 2.3k municipalities, connecting the Federal District and all state capitals in Brazil.

GlobeNet – Overview

GlobeNet provides wholesale telecom services in Latin America, owning and operating subsea cables that span over 14.6k miles (23.5k kilometers). Additionally, GlobeNet’s network infrastructure includes Cable Landing Stations (CLSs) in Brazil, Colombia, and the United States (New Jersey and Florida).

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