Brasil Telecom Jumps on JPMorgan ‘Overweight’ Boost

Brasil Telecom SA gained for the first time in nine days after JPMorgan Chase & Co. raised the Brazilian phone company taken over by Telemar Norte Leste SA to “overweight” from “neutral.”

Brasil Telecom jumped 3.3 percent to 11.76, the biggest gain in more than two weeks.

Brasil Telecom had dropped 12 percent between March 15 and March 26, after Telemar said it would reduce the price it is offering minority shareholders for their stakes. The shares slumped 5.5 percent on March 25, when Telemar said it was offering about 21 percent less. The reduced offer will likely be rejected and Brasil Telecom may continue to trade as a separate stock, JPMorgan analyst Andre Baggio wrote in today’s note.

“Being a minority shareholder in BTM could mean significant cash return” as Telemar raises the amount of dividends paid out by Brasil Telecom to help service its own debt, Baggio wrote. “In such a scenario, we believe investors would be better off being in BTM shares among all PN shares of Telemar under our coverage.”

Telemar PN, or preferred, shares climbed 3.5 percent, while parent company Tele Norte Leste Participacoes rose 1.2 percent to 31.57 reais.

Each American depositary receipt of Brasil Telecom, which trades under the BTM ticker, represents three preferred shares, the most traded class in Brazil. The ADRs rose 5 percent in New York trading.

Business Week