Minuta Mattos Filho
11.03.2007
PROPOSAL AND JUSTIFICATION OF PARTIAL SPIN-OFF OF CYRELA
BRAZIL REALTY S.A. EMPREENDIMENTOS E PARTICIPAÇÕES
The Board of Executive Officers of Cyrela Brazil Realty S.A. Empreendimentos e
Participações (“CBR” or “Company”), pursuant to Articles 223, 225 and 229, paragraph 2
of Law no. 6,404 of December 15, 1976, and further amendments (“Brazilian Corporation
Law”), after thorough analysis of the Company’s corporate purposes, in line with the
Company’s future interests, submits this justification of the Company’s partial spin-off, by
transferring the spun off portion to a new company to be incorporated (“Justification of
Partial Spin-Off”) for resolution by the Board of Directors and, should it be approved, for
further resolution in the Extraordinary General Meeting (“AGE”).
CHAPTER I
REASONS AND PURPOSES OF THE OPERATION
1. CBR is a publicly-held company, whose capital stock in March 14, 2007 was one billion,
five hundred eighty-one million, five hundred twenty-seven thousand, nine hundred
thirty reais (R$1,581,527,930.00), fully subscribed and paid, divided into
three
hundred fifty-four million, four hundred sixty-four thousand, eight hundred seventyeight (354,464,878) common, registered, book-entry shares with no par value,
distributed among its shareholders as follows:
Shareholders
Eirenor Sociedad Anonima
Elie Horn
EH Capital Management
Janus Capital Management - USA
Rogério Jonas Zylberzstajn
Managers
Treasury
Other
Total
Number of Ordinary
Shares
21,900,008
118,609,778
7,502,400
22,070,100
7,286,644
1,229,494
6,000
175,860,454
354,464,878
%
6.18
33.46
2.12
6.22
2.06
0.35
0
49.61
100.00
Minuta Mattos Filho
11.03.2007
2. CBR’s corporate purpose is the development, purchase and sale of completed or
under-construction real estate, residential or commercial, lands and notional fractions,
the rental and management of real estate, the building of real estate, and the
rendering of consultancy services in matters related to the real estate market.
3. CBR has several subsidiaries, through which it develops the activities described in its
corporate purposes. Among such subsidiaries, the Company had, as of December 31,
2006, 92.5% of the stock capital of Comercial Properties Investimentos Imobiliários
Ltda. (“CCPII”). The remaining 7.5% of the capital stock are held by Cyrela Imobiliária
Ltda., another of CBR’s subsidiaries.
4. CPII, in its turn, holds, as of December 31, 2006: (i) direct stakes in investment funds
that hold the Nova São Paulo, Verbo Divino, Brasilinvest, CENESP, Brasílio Machado,
Faria Lima Financial Center, Corporate Park, JK Financial Center, Faria Lima Square
office buildings, and ABC Plaza Shopping; (ii) direct stake in Shopping D; and (iii)
other properties for income.
5. CCPII’s assets described in item 4 above are related to the activities of (i) development
for and acquisition of office buildings and shopping centers and (ii) management of
those properties (“Commercial and Industrial Real Estate Development Activities”).
Such activities have characteristics, target public and competitors that are different
from those of other development activities for sale, and also have different
profitability and margins.
6. The purpose of CBR’s intended partial spin-off is the segregation of the net assets
related to the quotas held by CBR at CPPII, and, consequently, of the assets related
to Commercial and Industrial Real Estate Development Activities, and transference to
a new publicly-held company to be incorporated, Cyrela Commercial Properties S.A.
Empreendimentos e Participações (“CCP”).
7. The present proposal for partial spin-off is justified by the fact that it is a corporate
and equity restructuring operation, which allows the Company to maintain its focus on
activities related to development for sale, concentrating its operations on that market
so as to become more efficient, maximizing its results. Likewise, CCP, a new company
to be incorporated and that will absorb CCPII’s quotas and its respective assets, will
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11.03.2007
be able to focus on Commercial and Industrial Real Estate Development Activities,
becoming more efficient to compete with its peers in that market.
8. Such fact will not result in a change in CBR’s corporate purpose, which will remain the
same, and CBR will be able to carry out activities related to commercial and industrial
real estate development.
9. Pursuant to Article 223, paragraph 3 of the Brazilian Corporation Law, since CBR is a
publicly-held company, listed in the New Market segment of the São Paulo Stock
Exchange – BOVESPA (“New Market”), CCP will obtain the registration as publicly-held
company, and the acceptance of its shares to be traded in the New Market, within the
maximum period of one hundred and twenty (120) days as from the AGE that
resolves on and approves the present proposal for partial spin-off.
10. CBR’s Board of Executive Officers understands that the operation will not result in
damages to its shareholders, once its corporate interests will be kept in identical
equity proportions at CBR and CCP. In addition to that, as set forth in Chapter III
below, CCP’s common shares attributed to CBR’s shareholders as a result of the
partial Spin-Off will be entitled to the same rights and advantages attributed to shares
issued by CBR and provided for in the project for CCP’s Bylaws, attached herewith
(Exhibit I).
11. By virtue of the reasons described above, and in view of the other conditions provided
for herein, the Company’s managers understand that the partial spin-off, as set forth
herein, represents the best alternative to conduct CBR’s activities, once it creates
more favorable conditions to preserving and adding value to its shareholders.
CHAPTER II
APPRAISAL CRITERION OF THE PORTION OF SHAREHOLDER’S EQUITY DIRECTED TO THE
NEW COMPANY, OPERATION REFERENCE DATE, TREATMENT OF THE SUBSEQUENT EQUITY
VARIATIONS AND DECREASE OF CBR’S CAPITAL
12. CBR’s partial spin-off will take place through the segregation and transference of the
net assets related to the quotas held by CBR at CPPII and, consequently, of the assets
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Minuta Mattos Filho
11.03.2007
related to Commercial and Industrial Real Estate Development Activities to a new
publicly-held company to be incorporated, CCP.
13. The value of CBR’s net assets to be transferred to CCP was determined through an
appraisal held on March 14, 2007 by Terco Grant Thornton Auditores
Independentes SS, headquartered in the city of São Paulo, state of São Paulo, at
Avenida das Nações Unidas, nº 13.797, bloco II, 20º andar, Corporate Taxpayer’s ID
(CNPJ/MF) 00.326.016/0001-99, duly registered at the Regional Accounting Council of
the State of São Paulo under #2 SP 018.196/O-8, represented by its partner, Mr.
José André Viola Ferreira, Brazilian, married, accountant, Individual Taxpayer’s
Register (CPF/MF) 163.086.958-90, duly registered at the Regional Accounting Council
of the State of São Paulo under #1 SP 195.865/O-0, Identity Card (RG) 16.903.4732, issued by the Public Security Office of the State of São Paulo
on 11.15.1989
(“Terco”), attached herewith (Exhibit II), and followed the accounting appraisal
criterion of
the net assets book value , based on the elements comprising CBR’s
balance sheet, as of December 31, 2006, reference date of the partial spin-off
(“Reference Date”), audited by Terco (Exhibit III).
14. On the Reference Date, CBR’s shareholders’ equity was of one billion, nine hundred
forty-eight million, five hundred fifty thousand, two hundred twenty-six reais and two
centavos (R$1,948,550,226.02). According to the aforementioned appraisal, CBR’s
total net assets to be spun off and transferred to CCP corresponds to two hundred
twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais
and thirty-seven centavos (R$228,222,951.37), representing 11.7124% of CBR’s total
shareholders’ equity. Such portion will still be composed of assets, as described in
Item 12 above, which will be contributed in the subscription and payment of CCP’s
capital stock, pursuant to Articles 7 and 8 of the Brazilian Corporation Law, with the
resulting issue of CCP’s shares in favor of CBR’s shareholders, who will become CCP’s
shareholders.
15. The equity variations occurred between the Reference Date and the effective approval
of the partial spin-off by CBR’s AGE will be appropriated by CBR or by CCP, depending
on whether they concern the assets, rights and obligations maintained at the
Company, or those related to the portion of CBR’s equity to be spun off and
transferred to CCP, respectively.
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11.03.2007
16. CCP will act on the development, purchase and sale of completed or underconstruction commercial and industrial real estate (including hybrids), of lands and
notional fractions, and/or the stake in real estate assets, in the leasing and
management of real estate, in real estate construction, and in the rendering of
consultancy services in matters related to the real estate market.
17. CBR’s net assets to be transferred will be conveyed to CCP’s equity, with the
consequent assumption by the latter of the liabilities resulting from the transferred
assets. The new company thus becomes responsible only for the obligations related to
the assets, rights and liabilities transferred to it, with no joint liability with the
Company, pursuant to Article 233, sole paragraph, of the Brazilian Corporation Law.
18. By virtue of the reasons described herein, any creditor of the Company will be able to
oppose to the conditions set forth, regarding their credit, provided that they notify the
Company within ninety (90) days as from the date of publication of the partial spin-off
acts, pursuant to Article 233, sole paragraph, of the Brazilian Corporation Law.
19. In view of the partial spin-off, CBR’s capital stock will be reduced by two hundred
twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais
and thirty-seven centavos (R$228,222,951.37), standing at one billion, three hundred
fifty-three million, three hundred four thousand, nine hundred seventy-eight reais and
sixty-three centavos (R$1,353,304,978.63), pursuant to the provisions in items 29 and
30 below, and the Company’s Bylaws must undergo the related amendment, pursuant
to the provisions in the attachment herewith (Exhibit IV).
20. After the analysis of the available options, CBR’s Management chose to hire the
specialized company Terco, whose experts proceeded to: (i) appraise the portion of
CBR’s equity purpose of the spin-off by book value, based on the elements comprising
the balance sheet audited by CBR, calculated on the Reference Date; and (ii)
elaborate the respective accounting appraisal report. The hiring of Terco and the
validity of the report that reflects the appraisal of the portion of CBR’s equity
described herein will be ratified in CBR’s AGE, and thus depend on the analysis and
approval of CBR’s shareholders, pursuant to Law no. 6,404/76.
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Minuta Mattos Filho
11.03.2007
CHAPTER III
NUMBER AND TYPE OF SHARES TO BE ATTRIBUTED TO CBR’S SHAREHOLDERS DUE TO THE
PARTIAL SPIN-OFF AND RIGHTS OF SHARES
21. CCP, like CBR, will have its capital stock composed only of common shares.
22. The number of shares issued by CCP to be attributed to current CBR’s shareholders
will observe the appraisal criterion determined by the book value of shareholders’
equity. Upon approval of the partial spin-off and incorporation of CCP, each CBR
shareholder will receive one CCP share for each share held in CBR, pursuant to Article
229, paragraph 5 of the Brazilian Corporation Law.
23. CCP’s common shares, attributed to CBR shareholders due to the partial spin-off of
CBR’s equity, will be entitled to the same rights and advantages attributed to shares
issued by CBR and provided for in the project for the Bylaws, attached herewith
(Exhibit I). There will not be an alteration or extinguishment of the rights of shares
to be issued by CCP in relation to shares issued by CBR. CCP will have the same
Depositary Receipts Programs as CBR as of the date of approval of the Partial SpinOff.
CHAPTER IV
ASSETS AND LIABILITIES TO BE TRANSFERRED TO THE NEW COMPANY
24. CBR’s partial spin-off will occur upon transference of CCP’s assets and liabilities,
pursuant to the provisions in Exhibit V herewith, which will form the portion of
shareholders’ equity conveyed to CCP, which will then be incorporated.
25. The adjustments and transference of assets, rights and obligations resulting from the
partial spin-off will be set forth, if this is the case, in appropriate instruments to be
timely formalized between the Company and CCP.
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Minuta Mattos Filho
11.03.2007
CHAPTER V
CBR’S CAPITAL STOCK BREAKDOWN AFTER THE PARTIAL SPIN-OFF
26. As a result of CBR’s partial spin-off, its capital stock will be reduced by two hundred
twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais
and thirty-seven centavos (R$228,222,951.37), representing the amount of spun off
net assets, standing at one billion, three hundred fifty-three million, three hundred
four
thousand,
nine
hundred
seventy-eight
reais
and
sixty-three
centavos
(R$1,353,304,978.63), fully paid, divided into three hundred fifty-four million, four
hundred sixty-four thousand, eight hundred seventy-eight (354,464,878) common,
registered, book-entry shares, with no par value, therefore without extinction of
shares.
27. Thus, its capital stock breakdown after the partial spin-off remains unaltered, as
follows:
Shareholder
Eirenor Sociedad Anonima
Elie Horn
EH Capital Management
Janus Capital Management - USA
Rogério Jonas Zylberzstajn
Managers
Treasury
Other
Total
Amount of Common
Shares
21,900,008
118,609,778
7,502,400
22,070,100
7,286,644
1,229,494
6,000
175,860,454
354,464,878
%
6.18
33.46
2.12
6.22
2.06
0.35
0
49.61
100.00
CHAPTER VI
BREAKDOWN OF THE NEW COMPANY’S CAPITAL STOCK AFTER THE PARTIAL SPIN-OFF
28. CCP’s capital stock, to be subscribed and paid with CBR’s spun off net assets, will be
two hundred twenty-eight million, two hundred twenty-two thousand, nine hundred
fifty-one reais and thirty-seven centavos (R$228,222,951.37), divided into three
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Minuta Mattos Filho
11.03.2007
hundred fifty-four million, four hundred sixty-four thousand, eight hundred seventyeight (354,464,878) common, registered, book-entry, shares, with no par value, and
will be distributed among its shareholders in identical proportion to CBR’s capital stock,
as follows:
Shareholder
Eirenor Sociedad Anonima
Elie Horn
EH Capital Management
Janus Capital Management - USA
Rogério Jonas Zylberzstajn
Managers
Treasury
Other
Total
Amount of Common
Shares
21,900,008
118,609,778
7,502,400
22,070,100
7,286,644
1,229,494
6,000
175,860,454
354,464,878
%
6.18
33.46
2.12
6.22
2.06
0.35
0
49.61
100.00
CHAPTER VII
AMENDMENT TO THE CBR’S BYLAWS AND PROJECT FOR CCP’S BYLAWS
29. In view of the reduction in CBR’s capital stock due to the partial spin-off, the
amendment to CBR’s Bylaws, pursuant to the terms of the minutes attached herewith
(Exhibit IV), will be submitted to CBR’s AGE, which will resolve on the partial spin-off,
without any damage or loss, of any nature, to any of its shareholders, or right of
refund of the shares held by those who disagree with the proposal.
30. The project for CCP’s Bylaws pursuant to the terms of the minutes attached herewith
(Exhibit I), as well as CCP’s listing in the New Market, will be submitted to the
appreciation of CBR’s AGE, which will approve the partial spin-off and the consequent
incorporation of CCP, which will also authorize CCP’s managers, elected in the said
meeting, to execute the respective Novo Mercado Membership Agreement with the
São Paulo Stock Exchange – BOVESPA.
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11.03.2007
CHAPTER VIII
GENERAL PROVISIONS
31. CCP will be incorporated at the moment of approval of the partial spin-off by the AGE,
when its managers will be appointed.
32. Once CBR’s partial spin-off and the conferring of the spun off portion to CCP’s capital
stock are accomplished,
with the consequent incorporation of CCP, it will be
incumbent upon CCP’s management, as well as CBR’s management, to practice all acts
deemed necessary for its implementation, as well as to carry out the filing of all acts
concerning the partial spin-off.
33. The cost to be incurred with the implementation of the partial spin-off process is
estimated at five hundred thousand reais (R$500,000.00), including expenses related
to the fees of auditors, appraisers, attorneys and publications.
São Paulo, March 14, 2007.
________________________________
_________________________________
Elie Horn
Luis Largman
Chief Executive Officer
Investor Relations Officer
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11.03.2007
Exhibit I
Project for the Bylaws of CCP(to be incorporated with the partial spin-off)
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11.03.2007
Exhibit II
Report of Appraisal of the Portion of CBR’s Shareholders’ Equity to be Spun off
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Minuta Mattos Filho
11.03.2007
Exhibit III
CBR’s Financial Statements on the Reference Date
Consolidated Balance Sheet
BR GAAP
R$ 000
December 31, 2006
ASSETS
Current Asset
Cash and Cash Equivalents
Financial Investments
Available for Sale Marketable Securities
Accounts Receivable
Marketable Real Estates
Current Accounts with Partners in Projects
Recoverable Income Tax and Contributions
Selling Expenses to be recognized
Other Receivables
December 31, 2005
2,159,160
57,524
357,244
2,462
566,306
976,182
23,132
12,170
101,972
62,168
835,684
35,403
60,052
3,067
190,229
420,914
35,370
12,318
48,462
29,869
Long-term Assets
Accounts Receivable
Financial Investments
Accounts receivable from expropriation
Related Parties
Recoverable Income Taxes and Contributions
Deferred Income Tax and Social Contribution
Advances for Real Estate Acquisition
Other Receivables
671,093
298,967
143,409
15,739
117,846
20,280
32,399
40,212
2,241
827,573
270,991
421,522
19,389
19,207
8,740
37,080
40,387
10,257
Permanent Assets
212,233
67,859
143,842
532
111,932
1,814
110,107
11
3,042,486
1,775,189
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Loans and Financing
Payable Taxes and Contributions
Provision for Estimated Costs
Real Estate Aquisition Payable
Dividends payable
Related Parties
Current Accounts with Partners in Projects
Clients' Advance Payments
Other Payables
643,543
57,236
43,884
50,144
250,119
30,183
23,416
21,537
83,988
83,036
403,100
95,126
29,570
25,262
77,017
27,185
10,267
21,125
82,615
34,933
Long-term Liabilities
Loans and Financing
Real Estate Aquisition Payable
Results of Real Estate Sales to be recognized
Provisions for Contingencies
Deferred Income Tax and Social Contribution
Other Payables
350,091
67,493
100,439
17,980
26,768
97,174
40,237
274,772
108,708
12,726
25,489
42,384
81,738
3,727
Minority interest
100,302
78,534
Investment in Controlled Companies
Fixed Assets
Deferred
Total Assets
SHAREHOLDERS' EQUITY
Capital Stock
Profit Reserve
Treasury Shares
1,948,550
1,581,527
367,034
(11)
1,018,783
819,045
199,749
(11)
Total Liabilities and Shareholders’ Equity
3,042,486
1,775,189
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11.03.2007
Exhibit IV
Minutes of CBR’s Bylaws as Amended after the Partial Spin-Off
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11.03.2007
Exhibit V
Assets and Liabilities to be Transferred to CCP
Assets
Current assets…………………………………………………..R$10,635,864.04
Investments in subsidiaries…………………………………..R$136,657,623.47
Investments in real estate investment funds…………………R$66,508,524.18
Goodwill to be amortized……………………………………….R$14,422,405.07
Sub-Total……………………………………………………....R$228,224,416.29
Liabilities
Current Liabilities……………………………………………………..R$1,465.39
Sub-Total…………………………………………………………….. R$1,465.39
Total……………………………………………………………R$228,222,951.37
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SP - 097757-00100 - 768498v1