(Adds analyst comment, details on meeting)
Jan 14 (Reuters) – Shares in Portugal Telecom jumped on Wednesday on speculation shareholders will ultimately approve the sale of its former operations by its merger partner, Brazil’s Oi, without raising the risk of the merger’s reversal.
Shareholders on Monday postponed a meeting to decide on the 7.4 billion euro ($ 8.7 billion) sale of assets by Oi to Altice . But they refused to cancel it or modify the agenda of the next meeting to vote on dissolving the merger, as proposed by Portugal Telecom’s workers union and the assembly chairman at one point.
The initial reaction to the postponement to Jan. 22 was to sell off Oi and Portugal Telecom shares, but the latter recouped most of their initial losses on Tuesday to close only about 2 percent lower, after two sessions in which trade was suspended.
“Looks like the market’s bet is that the most likely scenario is that shareholders will approve the sale at the next meeting without reversing the merger,” said Sergio Vieira, a trader at brokerage Orey Financial in Lisbon.
Portugal Telecom’s only valuable asset after the merger would be its 25.6 percent stake in the enlarged Oi, which should benefit from the sale and help Portugal Telecom’s valuation.
“It’s a convoluted way around, but the asset sale ultimately helps PT,” said Allan Nichols, senior analyst at research firm Morningstar.
The sale would give Oi more flexibility and muscle for a telecom sector consolidation in Brazil and should pave the way for further disposals of former PT assets in Africa and Asia.
“All that should get the sentiment improving for Oi and help PT … At this point your best bet is to vote for the deal. They don’t have a lot of choice. Anything else it’s ugly, especially unwinding the merger, which would be really difficult,” Nichols said.
Portuguese media and telecom holding company Ongoing, which is a major shareholder in Portugal Telecom, said it saw no valid alternative to the asset sale and the merger is not at stake.
Antonio Menezes Cordeiro, chairman of the shareholder meeting who initially argued the merger became invalid after Oi agreed to sell the assets, later acknowledged that any attempt to break off the deal would be legally complex because the deal included a share issue by Oi in Brazil.
Portugal Telecom shares, which had slumped to a record low of 0.629 euros at one stage on Tuesday, were up 17 percent at 0.819 euros by 1201 GMT. ($ 1 = 0.8513 euros) (Reporting by Daniel Alvarenga and Andrei Khalip; Editing by David Holmes)