BRAZIL Law and Practice Contributed by: Rodrigo Casarotti, Alexandre David, Ricardo Melaré and Gabriela Claro, /asbz
6.6 Deal Documentation It is customary to have a transaction agreement between bidder and target (and/or controlling share- holders) in supported offers. Beyond recommenda- tion, the target may commit to co-operation on filings, diligence access and ordinary-course covenants. Representations and warranties are limited versus private M&A and focus on fundamentals (corporate authority, capital, compliance and accuracy of dis- closed information), and must comply with principles of equal treatment and market transparency. 6.7 Minimum Acceptance Conditions Minimum acceptance thresholds are common to ensure a bidder achieves effective control (typically a majority of voting capital) or other strategic owner- ship levels (eg, facilitating delisting or reorganisation). Conditions must be objective, disclosed and consist- ent with equal-treatment rules. 6.8 Squeeze-Out Mechanisms Brazilian law does not provide an automatic statu- tory squeeze-out mechanism based solely on tender acceptances. In control offers, bidders must com- mit for a limited period to purchase remaining shares at the offer price, but cannot compel non-tendering shareholders to sell. For delistings and cancella- tions of registration, a tender offer to all minorities at a price supported by an independent appraisal is required; non-tendering shareholders typically remain in a closely held company post-deregistration. Bid- ders aiming for near-100% ownership generally com- bine tender offers with post-closing reorganisations (mergers, incorporations or incorporations of shares) approved in shareholders’ meetings and subject to minority protections (including withdrawal rights and potential valuation challenges). 6.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer There is no formal “certain funds” test identical to those in other jurisdictions, but the bidder must appoint a financial-institution intermediary and ensure adequate arrangements (eg, cash collateral, guaran- tees) so the CVM and B3 are satisfied the offer can be fully settled. In practice, funding is arranged before launch and described in offer documents. Condi- tions enabling withdrawal due to lack of financing are
the free float below the minimum levels prescribed by the CVM. 6.3 Transaction Structures Public company acquisitions are typically implement- ed via tender offers and direct share purchases, or through corporate reorganisations in which one com- pany is merged or incorporated into another. Mergers into a newly formed vehicle are legally possible but less common, reflecting procedural complexity, tim- ing, appraisal/withdrawal rights, valuation disputes in listed-company contexts and other tax implications. 6.4 Consideration and Minimum Price Cash is the most common form of consideration in acquisitions of listed companies. Share-for-share or mixed consideration appears mainly in larger or cross- border deals or where the combination is structured as a statutory reorganisation with share issuance to target shareholders. Cash is permissible in both tender offers and merg- er-type structures, but full cash-outs are generally implemented as tender offers, with corresponding disclosure and procedural requirements. In a sale of control, the statutory tag-along is not less than 80% (or 100% where by-laws/segment rules so provide). In delisting or free-float-related offers, the price must be supported by an independent appraisal. Earn-outs and contingent consideration may be used to bridge uncertainty, typically in simpler forms than in more developed public markets. 6.5 Common Conditions for a Takeover Offer/ Tender Offer Conditional tender offers are permitted, with condi- tions required to be objective and clearly disclosed. Common conditions include antitrust and other reg- ulatory approvals. Financing-out conditions are not accepted in mandatory offers; bidders must evidence the ability to settle at launch. For voluntary offers, con- ditionality is possible but market practice favours high certainty of funds. Minimum acceptance thresholds and “no material adverse change” conditions may appear, subject to equal treatment.
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