‘
WEG S.A.
TRAFO EQUIPAMENTOS ELÉTRICOS S.A.
Publicly held company,
Avenida Prefeito Waldemar Grubba, nº 3.300
Jaraguá do Sul, Santa Catarina,
CNPJ n.º 84.429.695/0001-11
Publicly held company,
Rodovia RS 20, km 6,5
Gravataí, Rio Grande do Sul
CNPJ n.º 90.286.105/0001-41
MATERIAL FACT DISCLOSURE
WEG S.A. ("WEG”) and TRAFO EQUIPAMENTOS ELÉTRICOS S.A.("Trafo"),
jointly referred to as "Companies", complementing the Material Fact Disclosure
published
on
September
recommendations
made
30,
by
the
2009,
inform
Special
the
following:
Independent
(i)
Committees
the
(
"Independent Committees") formed at WEG and TRAFO in order to negotiate
the basis of the incorporation of shares issued by TRAFO held by the noncontrolling shareholders by WEG, in accordance with article 252 of the
Corporations Law (the "Incorporation of Shares") and in compliance with CVM
Parecer de Orientação No. 35 of 01.09.2008, and (ii) the resolutions adopted by
the respective Boards of Directors at WEG and TRAFO, as follows:
1.
Independent Committees. From September 30, 2009 onwards, the
members of the Independent Committees of WEG and TRAFO began
negotiations, duly advised by, respectively, PricewaterhouseCoopers Corporate
Finance & Recovery Ltda., below qualified, and Deloitte Touche Tohmatsu
Consultores Ltda., a company headquarters in the city of São Paulo, Rua
Alexandre Dumas, 1981, CNPJ / MF under No. 02.189.924/0001-03. The
negotiations culminated in December 08, 2009, with the following conclusions, by
unanimous deliberation:
(i)
the criteria to be used to fundament the share substitution ratio is the
economic value, based on the appraisal report;
‐ 1 ‐ (ii)
the share substitution ratio is of 4.05 common or preferred shares issued by
TRAFO for every 1 common share issued by WEG, as this is considered to
be an equitable ratio to all shareholders of the Companies, considering that:
a) the capital of the WEG is exclusively represented by common shares, in
accordance with BMF&BOVESPA Novo Mercado bylaws; and b) economic
value is the method that best defines the fair price of the shares of the
Companies;
(iii)
the terms and conditions of the incorporation of shares issued by TRAFO by
WEG are fair and appropriate and its implementation is recommended;
2.
Boards of Directors. The respective members of the Boards of Directors of
WEG and TRAFO, after learning about the discussions, conclusions and
recommendations that took place between the members of the Independent
Committees, proposed to accept the recommendations of the Independent
Committees regarding the previously mentioned share substitution ratio.
The respective Boards of Directors decided to approve the Incorporation of
Shares proposal, according the terms and conditions contained in the "Protocol
and Justification of Incorporation of Shares issued by TRAFO Equipamentos
Elétricos SA by WEG SA" ("Protocol and Justification"), the main points of
which are described below:
a. Incorporation of Shares. The incorporation of all shares issued by TRAFO,
except for the shares held indirectly by WEG, through its subsidiary WEG
Equipamentos Elétricos S.A., a privately held company with head offices at
Avenida Prefeito Waldemar Grubba, nº. 3300, 1st floor, Jaraguá do Sul,
Santa Catarina, CNPJ / MF under nº. 07.175.725/0001-60, incorporating a
total of 13,277,113 (thirteen million, two hundred seventy seven thousand,
one hundred and thirteen) shares issued by TRAFO, which will became a
full subsidiary of WEG, under Article 252 of Law 6.404/76 ("LSA"), under
the terms and conditions described on the Protocol and Justification.
‐ 2 ‐ b. Base Date. The Incorporation of Shares will be based on financial
statements dated September 30, 2009 ("base date") and will be effective,
after deliberation by the Extraordinary Shareholders’ Meeting, on December
28, 2009 ("incorporation-date").
c. Justification. The operation is justified by a) for business reasons, to allow
for the (i) convergence of available resources, (ii) synergy gains, and (iii)
simplification of the current structure, with consequent reduction on
financial, operational and administrative costs, as well as (iv) to make WEG
the only publicly listed entity within the group of companies under its control,
increasing the liquidity; and b) for tax purposes, with benefits for all
shareholders of both Companies, as it will allow for (i) the recovery of,
under the tax laws, the goodwill from the acquisition of TRAFO shares, to
the approximate amount of R$ 78 (seventy eight) million.
d. Ratio of substitution. The Incorporation of Shares will result in the noncontrolling shareholders of TRAFO receiving one share issued by WEG for
each 4.05 preferred or common shares issued by TRAFO held, as defined
by the Boards of Directors of the Company.
e. Criteria. The exchange ratio was set based on the criteria economic value
of the Companies´ assets, based on the appraisal report prepared by a
specialized company, with base date of September 30, 2009.
The aforementioned criteria was considered equitable to the shareholders of
both Companies, as: (i) the capital stock of the WEG to be exclusively
represented by common shares, in accordance with BMF&BOVESPA Novo
Mercado bylaws; and (ii) economic value is the method that best defines the
fair price of the shares of the Companies, as well as the other terms and
conditions presented in the Protocol and Justification.
f. Share rights. The holders of common or preferred shares of TRAFO will
receive common shares from WEG with the advantages and political and
property rights reported in the chart below:
‐ 3 ‐ Prior to the Merger of Shares
After the Merger of Shares
Common Shares
Preferred Shares
Common Shares
“TRFO4”
“WEGE3”
“TRFO3”
a. Eligible to vote at a. priority in the payment of a. Eligible to vote at General
minimum,
General Meetings
non-cumulative, Meetings
dividends of 8% over the own
b. right to receive a
minimum
25%
of
dividend
the
annual
of
adjusted
net
according the law.
profit
nominal capital of such shares,
to be divided among them
according to the number of
shares
available,
or
10%
above the amount that is
attributed
to
the
common
b. 25% of the adjusted annual
net profit according the law, as
payment of dividends and/or
interests over capital according
the law nº 9.249/95 attributed
to the dividends
shares, prevailing the higher
limit.
g. Capital increase. The Incorporation of Shares will increase the equity of
U
U
WEG, through the transfer of all shares of non-controlling shareholders of
TRAFO, valued by the criteria of economic value, applying the average
value between the minimum and maximum values established in the
appraisal report provided by specialized company, with base date of
September 30, 2009, or R$ 4.31 (four reals and thirty-one cents of real) per
share.
As such, the total increase will correspond to the amount of R$
57,224,357.03 (fifty-seven million, two hundred and twenty-four thousand
three hundred and fifty-seven reais and three centavos), being R$
12,293,623.15 (twelve million, two hundred and ninety three thousand, six
hundred and twenty three reals and fifteen cents of real) to increase the
capital stock and R$ 44,930,733.88 (forty four million, nine hundred and
thirty thousand, seven hundred and thirty three reals and eighty eight cents
of real) to the Reserve of goodwill subscription.
h. The fractions of shares resulting from the ratio of substitution of shares, will
be complemented by the delivery of shares already issued by WEG, owned
by its controlling shareholder WEG Participações e Serviços SA
‐ 4 ‐ i. Equity Changes. All equity changes occurred at WEG, between the basedate (September 30, 2009) and the incorporation-date (December 28, 2009)
will be recorded at WEG, and all equity variations in TRAFO between the
base-date (September 30, 2009) and the incorporation-date (December 28,
2009) will be recorded and recognized by WEG through the equity method.
j.
Right of Withdrawal. The incorporation of shares awards the right of
withdrawal to the dissenting shareholders of both WEG and TRAFO, as
provided by the pertinent legislation, within 30 days from the date of
publication of the minutes of the Extraordinary Shareholders’ Meeting that
approves the Protocol and Justification.
k. Ratio of substitution at market prices. For the purposes of Article 264 of Law
6404/76, the ratio of substitution of the shares to be incorporated and the
shares that will be issued to non-controlling shareholders of TRAFO, valued
at market prices, would be 2.16 (two integers and sixteen tenths) commom
or preferred shares of TRAFO for every 1 (one) common share of WEG, as
per the appraisal report prepared by the specialized firm.
l.
Considering that the ratio of substitution established by the net equity at
market prices criteria (as per the appraisal Valuation report prepared by
Price) was shown to be more beneficial to non-controlling shareholders
than the ratio of substitution chosen by the by Companies, the dissenting
shareholders may choose between (i) the amount of reimbursement
pursuant to Article 45 of Law 6404/76, i.e. the value of the net equity of
shares, as recorded on the Balance Sheet on December 31, 2008, of R$
3.53 (three reais and fifty three cents of real) per WEG share, and R$ 1.44
(one real and forty four cents of real) per TRAFO share, and (ii) the net
value of the shares at market prices, as per the appraisal report provided by
Price, corresponding to R$ 5.39 (five reais and thirty nine cents) per WEG
share and R$ 2.50 (two reais and fifty cents) per TRAFO share.
m. Composition of the capital stock of WEG S.A. after the incorporation of
U
U
TRAFO shares. After the incorporation of shares WEG will hold, directly and
indirectly, 43,377,993 (forty-three million, three hundred and seventy-seven
‐ 5 ‐ thousand, nine hundred and ninety-three) shares representing the entire
capital stock of TRAFO, which will become a whole-owned subsidiary of
WEG.
The stock capital of the WEG will increase from R $ 1,800,000,000.00 (one
billion eight hundred million reais), represented by 617,626,729 (six
hundred and seventeen million, six hundred and twenty-six thousand, seven
hundred and twenty-nine) common shares, without par value, all with voting
rights, to R$ 1,812,293,623.15 (one billion, eight hundred and twelve
million, two hundred and ninety three thousand, six hundred and twenty
three reais and fifteen cents), represented by 620,905.029 (six hundred and
twenty million and ninety five thousand, twenty nine) common shares
without par value, all with voting rights.
n. The incorporation of shares will not be submitted to the regulatory
authorities or Brazilian and foreign antitrust regulation.
3.
Subsequent operations. Aligned with the justification of the incorporation of
shares, and considering that the only this incorporation of shares in not enough
archive the desired benefits, two additional steps must ensue, as follows:
3.1
WEG will promoted by the increase of capital in its subsidiary WEL, to
the exact amount of the asset increase occurred at WEG as result of the
incorporation of TRAFO shares, and this capital increase will be subscribed by
WEG with the shares of TRAFO received from the non-controlling shareholders,
under the terms of Protocol and Justification (item 2), making WEL the sole
shareholder of TRAFO;
3.2
WEL, as the sole shareholder of TRAFO, will incorporate all assets from
TRAFO, succeeding it in all its rights and obligations, extinguishing TRAFO and
concluding the combination of businesses, as proposed by the management of
TRAFO , examined and approved, at the current date, by the Board of Directors
of TRAFO on the terms and conditions presented in the Protocol and
‐ 6 ‐ Justification of Merger of Shares of TRAFO by WEL ( "Protocol and Justification
of Incorporation"), as follows:
a.
Base-dates. The Merger will use the financial statements on September
30, 2009 and will be effective on December 30, 2009.
b.
According to the appraisal report, based on accounting value criteria,
prepared by specialized company, the total net assets of TRAFO to be
incorporated by WEL is of R$ 76,165,252.77 (seventy-six million one
hundred sixty-five thousand two hundred and fifty-two reais and seventyseven centavos), and there are no liabilities and / or contingent liabilities
not recorded, as knew by the Companies, to be added by WEL as a result
of the Merger.
c.
Ratio of substitution. Considering that WEL will be the sole shareholder of
TRAFO, the capital stock of WEL will not be increased, and thus, it will not
be necessary to issue new shares and, in consequence, the establishment
of the ratio of substitution of shares, as the net worth of TRAFO will be
fully reflected in the net worth of WEL, due to the application of the equity
method, which also makes unnecessary the analyses of market prices,
under the terms of Article 264 of the LSA, as precedents from Securities
and Exchange Commission.
d.
Shares Rights. The political, property and other rights of shareholders of
WEL will not be changed as a result of the incorporation.
e.
Succession. WEL will assume all rights and obligations of TRAFO of all
kinds, including labor (Articles 10 and 448 of the Labor Code), pension
(Law 8212/91) and tax (Article 132 of the National Tax Code) present and
that may occur in the future.
4.
Additionally,
for
both
transactions,
incorporation, we inform that:
‐ 7 ‐ incorporation
of
shares
and
a.
Operation Costs. It is estimated that the transactions will cost
approximately R$ 1.5 million (one million five hundred thousand reais),
including the cost of publishing, auditors, appraisers, lawyers and other
technical professionals to be hired to assist the transactions.
b.
Date for Exchange of Negotiation Codes. The shares issued by TRAFO
will continue to be regularly traded until the close of the Brazilian Stock
Market at the day immediately following the expiration date period for the
former shareholders of TRAFO in exercising the recess right mentioned on
item 2, “k”, by notice to the shareholders.
c.
Specialized companies. The specialized companies, hired ad referendum
of the Extraordinary Shareholders’ Meetings of TRAFO and WEG, Ernst &
Young Independent Auditors S/S, a Brazilian “simple society”, with head
offices in São Paulo, São Paulo, at Avenida Presidente Juscelino
Kubitschek, 1830, Torre 1, 6 andar, enrolled with the CNPJ / MF under nº.
61.366.936/0001-25, and PricewaterhouseCoopers Corporate Finance &
Recovery Ltda., with head office in the city of São Paulo, Avenida
Francisco Matarazzo, nº. 1400, Torre Torino, Água Branca, enrolled with
the CNPJ / MF under nº. 05.487.514/0001-37, to evaluate the assets of
the Companies, declare to the Companies that: (i) have no interest, direct
or indirect, in any of the Companies or in the incorporation of shares (ii) do
not exist situations that could be considered as a conflict or pooling of
interests, actual or potential, between any of the specialized companies
and WEL, which is controlled by WEG and controlling shareholder of
TRAFO, and WEG Participações e Serviços, controlling shareholder of
WEG, and (iii) WEG Participações e Serviços and WEL, as well as the
directors of the Companies did not induce, limit, hinder or perform any act
which has or may have compromised the information access, as well as
the use or knowledge of information and documents relevant to the
conclusions of the specialized companies.
d.
Documents Available to the Shareholders: All documents used in the
planning, evaluation, promotion and execution of the incorporation, the
‐ 8 ‐ 5.
Extraordinary General Meetings. Finally, the Company announced that, as
deliberations of their respective Boards of Directors, shall be called Extraordinary
General Meetings to decide on the operations herein (in this Material Fact), to be
held on 12.28.2009 and 12.28.2009, as Meeting Notice published today.
Jaraguá do Sul – SC
Gravataí - RS
December 9, 2009
Alidor Lueders
Luiz Alberto Oppermann
Investor Relations Officer
Investor Relations Officer
WEG S.A.
TRAFO EQUIPAMENTOS ELÉTRICOS S.A.
‐ 9 ‐