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Case UOL


The company called Universo Online S.A., better known as UOL, is the Brazil’s biggest internet content services company. As well as owning the most well-known website in Brazil, the company has the most extensive content in the Portuguese language anywhere in the world, a fact which attracts seven out of every ten Brazilian internet users. This position was achieved as a result of its history of credibility and innovation.

Over the fourteen years it has been in existence, UOL has become synonymous on the Brazilian internet with offering high quality content in the fields of news, sport and entertainment, as well as services and products focusing on the needs of the growing web public. According to the company’s corporate website, today there are over a thousand specific channels, as well as dozens of theme-focused categories.

UOL is also a public company whose preferential shares are listed on Level 2 l of the ‘Novo Mercado’ segment of the BM&FBovespa. According to data from UOL’s CVM Reference Form its shareholding is structured as follows:

Folhapar S.A. and Queiroz Shareholders signed a shareholders agreement on January 27, 2011, guaranteeing the following benefits and rights to Queiroz Shareholders: prohibition of the sale of shares and Folhapar’s preferential rights option in the sale of its equity interest; access to privileged information concerning UOL’s financial statements; right to the approval of transactions with related parties involving over R$20 million; the right of forced sale and the right of joint sale; prior approval on a series of important matters prior to the General Shareholder Meeting, and; representation on the administrative board, amongst other points (see below). Soon afterwards, at an assembly held in April 2011, Mr. João Alves de Queiroz Filho was elected as a UOL board member.

In a Material Fact dated July 26, 2011, Folhapar announced its intention to perform a public offer for the delisting and cancellation of UOL´s registration with the CVM, offering a price of R$ 17.00 per share, with the objective of acquiring 40.89% of UOL´s capital, a percentage which corresponded to the number of preferential shares, supposedly in circulation on the market. This offer would therefore include the preferential shares held by the Queiroz Shareholders, which would remain with its ordinary shares and, thus, a significant shareholder in the company. The graph below shows the behavior of the UOL preferential share prices since the start of the year. The announced price of R$ 17.00 per share is equivalent to a premium of 4.9% above the share’s closing price on July 25, 2011.

According to item 10 of the Novo Mercado Regulations, it is necessary to contract an expert appraisal report to justify the offer, or, in other words, establish an economic value. The mentioned regulation stipulates that the choice of financial institution which drafts the report falls to those shareholders with “free float” shares, in accordance with the following definition:

All shares issued by the Company, except for those held by: the Controlling Shareholder, people entailed to him/her/it, the Company’s Senior Managers, the Company’s treasury and that special class of shares intended to ensure differentiated policy-making rights, which are held by the privatizing entity on a non-transferable and exclusive basis (golden shares).

The UOL management, by means of its board controlled by Folhapar, suggested three institutions which could be chosen at an extraordinary general assembly held on August 18. At the mentioned assembly, Queiroz Shareholders exercised their vote and chose Bradesco BBI, even though other minority shareholders present had voiced manifestations against this vote. In the defense presented by UOL to the CVM, Mr. João Alves de Queiroz Filho, representative of Queiroz Shareholders on the administrative board, was cited as having abdicated a few days prior to the EGM, although this abdication had not been published or filed with the relevant Board of Trade, as required by law in order that the abdication be effective in relation to third parties.

On August 29, 2011, and therefore 12 days after its selection, the expert report of Bradesco BBI arrived at an economic value equivalent to R$ 16.83 per share. The next day, Folhapar announced that it would maintain the price offer of R$ 17.00 per share.

Numerous minority shareholders, including Fator, Leblon Equities, Cox (foreign investor), and Quest funds, presented complaints to BM&FBovespa and the CVM, questioning the validity of the vote proffered by Queiroz Shareholders and requesting a new assembly to choose a new evaluator. These shareholders together held more than 10% of the free float shares (to call a second evaluator is a right guaranteed by Brazilian Law). The minority shareholders also questioned the Bradesco BBI report in respect to the growth rates used, the growth used in perpetuity, the lack of expansion of margins in the projections, the CAPEX used and the assumptions on working capital. A new assembly was called for October 5 to decide upon the selection of a second expert report.

On September 15, BM&FBovespa made an announcement following an inquiry into the status of Queiroz Shareholders, and concluded that they should not configure as shareholders forming part of the group of shareholders holding power of control, nor as persons connected to the controlling shareholder (see below).

The Board of the CVM, at a meeting held on October 3, stated that:

This concerns a request for the interruption of the established period prior to the convocation of the Extraordinary General Assembly (“EGM”) of Universo Online S.A. ("UOL" or “Company”) convoked for October 5, 2011, presented by Fundo Fator Sinergia IV – FIA, amongst others (“Applicants”), with the intention that the CVM recognize and analyze the proposal to be submitted to the EGM, in the form of art. 124, §5, II of Law n° 6.404/76, and art. 3 da CVM Instruction n°. 372/02.

The EGM was called by means of a request presented by the Applicants, based upon art. 4-A of Law n°. 6.404/76, to decide upon a new evaluation of the Company in terms of the public offer for the acquisition of free float shares for the cancellation of the registration of the public company announced by their controlling shareholder.

On September 23, 2011, the Applicants requested the interruption of the established period prior to the convocation of the EGM with the intention that the CVM recognize and analyze the proposal to be submitted. Furthermore, they requested a statement from the CVM concerning the impossibility of the group referred to as Queiroz Shareholders (João Alves de Queiroz Filho, Negotio Magni, S.A. of C.V. and Antonio Juan Bautista Vierci Mendonza) voting at the EGM, since they believe that the shares held by such group do not comply with the requirements of free float shares as defined by art. 4°-A, lead paragraph and §2 of Law n°. 6.404/76, items 2.1 and 10.1.1 of the Regulations for Listing on Level 2 of BM&FBovespa, or art. 33, §1 of the Company’s Articles of Association.

UOL, in turn, made a statement on September 27, 2011, to the effect that it did not consider there to be any reason for the interruption to be deferred since there was no illegality in the proposal to be submitted to the EGM. Furthermore, the Company presented legal opinions which considered the free float shares to be held by Queiroz Shareholdes, concluding, therefore, that their members could vote at the EGM.

At an Extraordinary Meeting held on October 3, 2011, based upon the statements made by the Corporate Relations Inspectorate (SEP), by means of RA/CVM/SEP/GEA-4/N° 70/11 and MEMO/CVM/SEP/GEA-4/Nº 128/11, the Board decided upon the non-interruption of the convocation period for the EGM. Despite the indications of irregularities raised by the SEP, the Board considered that it would not be possible within the legally restricted limits for the interruption procedure, to clearly establish sufficient certainty as to the existence of violation of legal or regulatory arrangements, especially without taking into consideration the possible actions taken by the shareholders at the assembly which had been convoked.

However, the Board established that it would continue with its verification of possible irregularities by means of its own investigative procedures, since, according to the statements made by the technical department, a possible vote by the Queiroz Shareholders could thwart the purposes of art. 4°-A of Law n°. 6.404/76, and could also be considered abusive under the terms of art. 115 of Law n° 6.404/76.


It can be seen, therefore, that the Board did not make a clear statement against the vote to be cast by the Queiroz Shareholders or upon the applicability of Art. 115 of the Corporate Law. However, the statement made by the Corporate Relations Superintendence (SEP) raised a number of points and concerns, including the following (see the attachment for a more complete outline):

22. As such, considering all which has been outlined in this analysis:

a. considering that there is no indication that the proposal violates any legal stipulations and/or regulations, and that the investigation of the actions of Queiroz Shareholders at the meeting requires the effective participation of these shareholders, the interruption of the established period prior to the Special Assembly of Shareholders with Free Float Shares convoked for 10.05.11 is unjustified;

b. due to all the information contained in this particular case, I believe that the casting of the vote of Queiroz Shareholders at the Special Assembly called for 10.05.11 could impede the purposes of art 4° of Law n° 6.404/76; and

c. should this right to vote be exercised, the conduct of Queiroz Shareholders at the assembly, and its consequences could be the object of investigation with the purpose of evaluating (i) the possible performance of a maneuver intended to circumvent the arrangements contained in art, 4-A of the Corporate Law, and (ii) compliance with the arrangements established in art. 115 of such Law; resulting in the adoption of the appropriate measures, should such be necessary.

The EGM was held on October 5 and, in view of the affirmative vote cast by Queiroz Shareholders, it was decided not to conduct a second economic evaluation on UOL, as had been requested by shareholders with more than 10% of the free float shares. The CVM’s investigation is continuing in relation to art. 115 and art. 4 of the Corporate Law, with no date for its conclusion.

Even so, on October 9, the controlling shareholder Folhapar agreed to increase the price offered to R$ 19.00 per share, and received letters from the shareholders who had protested against the first valuation saying that they now agreed with this price. This price increase of around 12% is a victory for the minority shareholders and can be seen as a representative case in the importance of defending one’s rights, of presenting complaints with the regulators and of maintaining an open dialogue with the controlling shareholder.

Read more about it:


UOL - resposta BMF.pdf

UOL - carta a BMF.pdf





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