- Portugal Telecom (PT-OLD -6.4%) and merger partner Oi (OIBR -9.9%) are both nosediving following news Espirito Santo Financial Group (a subsidiary of Espirito Santo International) is filing for bankruptcy. The decline also comes a day after Oi CEO/ex-PT CEO Zeinal Bava announced his resignation.
- The WSJ reports "major Oi shareholders began to have doubts about [Bava's] leadership" following news of PT's $1.22B loan to another subsidiary of Espirito Santo International (previously a major PT shareholder). The loan has already led PT and Oi to restructure their merger agreement, so as to lower PT's stake in the merged company to 26% from 38%.
- Nonetheless, many on the Street aren't happy Bava is gone. Credit Suisse: "We see the exit of Zeinal Bava and the lack of continuity at the CEO level of Oi over the years as a negative for the company’s operating performance. We had seen Mr. Bava as a key person behind the company’s plan to improve operations and deploy capital more efficiently."
- Bava's departure comes as French cable giant Altice reportedly preps a bid for PT that (if successful) would unravel the Oi merger, and as Oi and its rivals explore ways for the Brazilian telecom industry to consolidate.
- PT has made new 52-week lows; Oi is close to its 52-week low of $0.51.