Colony Capital Makes Surprise Bid for $2.9 Billion Oi Unit

Colony Capital Makes Surprise Bid for $2.9 Billion Oi Division

Digital Colony, an arm of Tom Barrack’s Colony Capital Inc., entered the fray for the mobile-phone unit of troubled Brazilian telecom firm Oi SA, a surprise twist for assets that seemed destined to be divided between the nation’s other wireless providers.

Highline do Brasil II Infraestrutura de Telecomunicacoes, Digital Colony’s local unit, was granted exclusivity in negotiations until Aug. 3, Oi said in a filing Thursday. The agreement gives Highline the right to top other proposals received by Oi for its mobile assets, which the company has valued at 15 billion reais ($2.9 billion). Highline’s offer exceeded that minimum, Oi said, without offering further details.

Oi’s voting shares surged as much as 19% in Sao Paulo to the highest in about a year.

The entry of a potential new player clouds the outlook for Brazil’s telecom sector. Over the weekend, the local units of Telefonica SA, Telecom Italia SpA and America Movil SAB made a joint binding offer for the assets, which would have reduced Brazil’s ultracompetitive market to three competitors. The proposal sent shares surging on hopes a deal would put an end to years of failed takeover attempts and speculation of consolidation in the Brazilian market.

Read More: Telefonica, Tim, America Movil Make Binding Offer for Oi Assets

Oi, which is also Brazil’s biggest landline carrier, has been carrying out a major debt restructuring since emerging from bankruptcy in 2018. The carrier, which posted losses of 6.28 billion reais in the first quarter, last month proposed segregating assets into four units, much of which would be sold for a total of 22.8 billion reais.

Colony, whose real estate portfolio was valued at $50 billion as of Dec. 31, has been steadily building up a collection of digital assets such as data centers and wireless towers to diversify beyond retail and hospitality real estate. Operating a wireless network would be a distinctly different business.

The firm has been expanding in Latin America, buying Highline do Brasil last year, and purchasing data center assets from Brazil’s Grupo Folha in April. Barrack has said the digital assets are holding up best as the pandemic causes chaos in the property market.

Highline do Brasil has also made a binding offer worth 1.08 billion reais for Oi’s tower unit, according to a regulatory filing on July 18.

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