Another article from WSJ:
Salamon Brothers' Group Wins
Mandate to Privatize Telebras
An INTERACTIVE JOURNAL News Roundup
RIO DE JANEIRO -- A consortium led by U.S. investment bank Salomon Brothers Inc. and including Morgan Stanley, Dean Witter, Discover & Co. won the mandate to privatize Brazil's telecommunications monopoly Telecomunicacoes Brasileiras SA, known as Telebras, Brazil's National Development Bank, or BNDES said Tuesday.
Link
International Banks Duke It Out Over Brazilian Telecom Mandate (Feb. 10)
Analysts have said that the international banks given the mandate to advise the Brazilian government on how to privatize its gigantic telephone system will probably reap more prestige and future business than money.
The Brasilcom group submitted Monday the lowest commercial bid of the three groups competing for the mandate. The Salomon-led group offered to charge the government 0.0669% of what it earns from selling a controlling stake in Telebras. The maximum fee that the consortia were allowed to charge was 0.25% of the Telebras sale proceeds.
Brasilcom's final grade was 9,0569, while the runner-up Telebrasil group received 9,0252. Telebrasil 2000 earned 7,9789.
Through its aggressive pricing, Brasilcom managed to undo the early lead taken by Telebrasil, a competing consortium that had won a perfect 10 for its technical proposal, which carries a 70% weight in the final grade. Brasilcom's technical proposal had won the lowest grade of all three consortia.
Telebrasil includes Merrill Lynch & Co.; NM Rothschild & Sons Ltd.; Credit Suisse First Boston Corp; The Netherland's ABN Amro Bank NV; and Banco Graphus SA and Metal Data Engenharia e Representacoes, both of Brazil.
Metal Data, a consulting firm that won notoriety for its advising role in last year's privatization of mining company Cia. Vale do Rio Doce SA, known as CVRD, leads the Telebrasil group.
Telebrasil 2000 is led by Brazil's Banco de Investimento FonteCindam SA and includes Kleinwort Benson Ltd.; Lehman Brothers Inc.; law firm Motta Fernandes Rochas e Associados -- Advogados; Deutsche Morgan Grenfell & Co. Ltd.; and Planconsult S/C Ltda.
What the winning consortium will take on is a "brain-damaging" mandate -- in the words of one banker -- to design what promises to be Latin America's most complicated and largest privatization ever.
On the block is the federal government's 21% stake in Telebras -- which carries just over 50% of voting rights. The adviser will be involved in auditing the Telebras octopus and will re-organize the holding by bundling 26 existing affiliates into three fixed-line companies, eight cellular-phone providers, and one long-distance carrier.
The winner will define the auction method and set the companies' minimum bid price. It will have to decide how to deal with the Telebras shares and American depositary receipts that already trade.
The size and complexity of the task means that the firms bidding for the mandate in some cases have been working at it for a couple of years, sometimes for very little money.
But Sebastiao Bergamini, president of the committee in charge of awarding the Telebras mandate, says that handling this privatization is a reward in itself. "In Brazil, the sale of Telebras is the filet mignon. It is the largest process."
The results will be published in the federal government's official newspaper Wednesday, BNDES said. After that, any consortium willing to contest Brasilcom's victory will have five days to file appeals. BNDES said it expects to sign the contract in March.
As expected, a consortium led by Arthur D. Little and including Coopers & Lybrand won a parallel mandate to conduct an economic and financial evaluation of Telebras.
The group will charge the government a flat fee of 8.27 million reals (47.37 million).
Government officials have said they hope to privatize the entire Telebras system by July. The government's 21% stake is estimated to be worth between 20 billion reals and 30 billion reals. |
