Cleary Gottlieb is representing long-time clients Telmex and Embratel in Telmex’s recently completed “going-private” cash tender offer to acquire Embratel’s publicly held shares and American Depository Shares. The tender offer, valued at approximately $800 million, began on October 3 and was completed in an auction on the São Paulo Stock Exchange on November 7.
Over the coming months, Embratel will terminate its New York listing, its ADR deposit agreement and, if certain conditions are met, its SEC reporting obligations. Subject to approval from the Brazilian telecom regulator, Embratel will also delist and deregister in Brazil.
The tender offer had an innovative structure: a unitary going-private offer in the United States and Brazil on terms that complied with the applicable tender offer regulations of both jurisdictions.
The transaction exemplifies the regional consolidation that has followed the privatization wave of the 1990s. Embratel was one of 12 companies spun off from the public-sector Telebrás system and privatized in 1998. At that time, MCI acquired a controlling interest. In 2004, Telmex (itself privatized in 1990) purchased MCI’s interest in Embratel, the biggest step in Telmex’s expansion of its business outside Mexico. Through subsequent transactions in 2004 and 2005, Telmex increased its ownership in Embratel and consolidated its Brazilian investments under Embratel.
Cleary Gottlieb has played a major role in these and related transactions, including as counsel to Telebrás in the 1998 privatization and counsel to Embratel since 2003. The firm has also represented Telmex since before its 1990 privatization.