Opposition to Brazilian group Oi's plans to sell off Portugal's former national telecoms operator, PT Portugal, is not expected to result in the business being returned to its former owner, Portugal Telecom SGPS, even if the immediate sale is blocked this week, analysts and lawyers said.
The sale to Franco-Israeli billionaire Patrick Drahi's Altice for 7.4 billion euros ($8.6 billion) needs the approval of PT SGPS's shareholders, but its shares slumped 10 percent to record lows on Monday, extending a slide in the price since the vote was postponed a week ago until Jan. 22.
The vote was postponed after opponents of the sale said it would defeat the objective of last year's merger between Oi and PT SGPS, which left PT SGPS holding a 25.6 percent stake in an enlarged Oi bestriding the Portuguese-speaking world.
But lawyers, analysts and the two companies have all said that trying to rescind the merger would be too costly and trigger years of litigation.
PT SGPS also said in a regulatory filing last week that even if the Altice sale is blocked on Thursday that would not preclude Oi selling the Portuguese business in the future, as the power of veto is a temporary one which will end once the shareholding structure of the merged entity is complete.
It also said that the rejecton of the sale to Altice will deprive Oi of the chance of taking part in the consolidation of Brazil's telecoms market.
PT SGPS's slide on Monday also followed a 7.7 percent drop in Oi's share price on Friday due to uncertainty over the outcome of Thursday's vote.
Both The Portugal Telecom workers' union and the chairman of PT SGPS's shareholder assembly have proposed that the meeting votes on whether to try and revoke the merger, despite the difficulties of doing so.
"Reversing this operation is legally impossible," said a lawyer involved in the sale, who pointed out that the merger involved a share issue by Oi in Brazil that was subscribed to by many international investors.
Joao Lampreia, an analyst at Banco BiG in Lisbon, said undoing the merger, aside from being very complex, would also add to the costs for PT SGPS's shareholders.
"Emotions aside ... the numbers have a lot of weight," he said, adding that he expected the level of compensation that would be demanded of PT SGPS by Oi for revoking the deal would be in the range of 2 billion to 4.6 billion euros.
A lawyer representing the Portugal Telecom workers' union said it was impossible to predict what the financial impact would be for PT SGPS's shareholders but he recognized that any attempt to dissolve the merger would result in legal conflict unless Oi also agreed to end the tie-up.
Oi said on Friday that the merger was "irreversible" following its share issue and that the Altice sale would help it reduce debts and pursue merger deals in Brazil.
Meanwhile PT SGPS's board said in its filing last week any claim for breach of contract with regard to the merger would lead to "a legal dispute of unpredictable duration in the Brazilian courts, further prolonging the deadlock situation of PT Portugal and inevitably creating a process of destruction of value for all parties involved".
