VCP » Topics » Recent Developments

This excerpt taken from the VCP 20-F filed Oct 28, 2009.

Recent Developments

Acquisition of additional equity interest in Aracruz

On January 20, 2009, VCP announced the conclusion of negotiations with the controlling shareholders of Arapar S.A. (“Arapar”) and members of the Lorentzen, Moreira Salles and Almeida Braga families (the “Families”) to acquire 127,506,457 common shares issued by Aracruz, representing approximately 28% of the voting capital of Aracruz. The purchase price of R$2,710 million is payable in six semi-annual installments as follows: (i) R$ 500 million was paid in cash on January 21, 2009; (ii) R$ 500 million is due on July 5, 2009, of which R$ 400 million will be paid in cash, and the remaining R$ 100 million could be credited in favor of the Families against VCP to be used as payment for preferred shares issued by VCP in a capital increase; (iii) R$ 500 million will be paid in cash on January 5, 2010; (iv) R$ 500 million will be paid in cash on July 5, 2010; (v) R$ 410 million will be paid in cash on January 5, 2011; and (vi) R$ 300 million will be paid in cash on July 5, 2011.

 

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On March 5, 2009, VCP entered into an agreement with Messrs. Joseph Yacoub Safra and Moise Yacoub Safra (“Safra Family”), to acquire an additional 127,506,457 common shares of Aracruz, representing another 28.03% of Aracruz’s voting capital, as a result of Arainvest’s exercise of tag-along rights in connection with the transaction carried out with the Families. The purchase price is of R$ 2,710 million and will be paid in six tranches pursuant to a schedule similar to that applicable to the Families. The acquisition of the Safra Family interest in Aracruz was closed by the end of April 2009. At that time, VCP owned approximately 84.09% of Aracruz’s voting capital, becoming the controlling shareholder of Aracruz.

The nominal value of the total transaction is R$5,420 million and its present value is the equivalent of approximately R$4,700 million.

Pursuant to Brazilian law, we have registered with the CVM a Public Purchase Offer for the acquisition of the remaining outstanding common shares of Aracruz, for a value equal to 80% of the price per share agreed with both the Families and the Safra Family, and to be paid upon the same terms and conditions as agreed with both the Families and the Safra Family. On June 1, 2009 VCP published the Public Purchase Offer for the acquisition of the remaining outstanding common shares of Aracruz and the offer is open from June 2, 2009 until July 1, 2009.

Aracruz’s preferred shares are traded in the NYSE in the form of ADSs under the symbol “ARA” and the company files periodic information with the SEC, including annual reports.

Increase of VCP’s corporate capital

Concurrently with the acquisition of the additional equity interest in Aracruz, an Extraordinary Shareholders Meeting of the Company was held on February 6, 2009, which contemplated management’s proposal to increase capital by up to R$4,254 million, with the issuance of up to 223,047,368 new shares, of which 62,105,263 would be common shares and up to 161,789,474 preferred shares at a unit price of R$19 per share, via a private subscription.

The issuance price corresponds to the value of the average market price of VCP shares traded on the stock exchange during the period beginning December 2, 2008 through and including January 16, 2009 as increased by a premium of 11.78%, which represented in the opinion of the Company’s management, the value of the new shares to be issued. At this Extraordinary Shareholder Meeting, management’s proposal was approved as presented, with the aforementioned capital increase to be subscribed and paid in the following manner:

 

(i) VID subscribed to, via the exercise of its preemptive right, 62,105,263 common shares with a total value of R$1,180 million that was paid via the utilization of R$1 billion of previously issued Advances for Capital Increases and the remaining R$180 million in money;

 

(ii) BNDESPar, holder of 56,880,857 common shares of Aracruz subscribed the equivalent of R$828 million for 43,588,699 preferred shares of VCP, utilizing its common shares of Aracruz, which received and subscribed at a unit price of R$14.56. The shares of VCP were issued at a unit price of R$19.00;

 

(iii) BNDESPar subscribed to 95,789,517 preferred shares of VCP for a value of R$1,820 million, requiring VID to transfer to BNDESPar, the preemptive right to subscribe to these preferred shares that remain after the subscription;

 

(iv) The remaining shareholders of Aracruz, holders of outstanding and in circulation common shares, had the right to subscribe using these common shares of Aracruz, which received at a unit value of R$14.56. The exchange of these shares for preferred shares of VCP was at the per unit value of R$19.00 and the difference was subscribed in money and none of such shareholders elected to subscribe;

 

(v) The Families and Safra Family subscribed preferred shares of VCP totaling a value of R$90 million each.

 

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The above capital subscriptions made on April 30, 2009 were ratified at an Extraordinary Shareholder Meeting’s of VCP on May 27, 2009. See “Item 7.A Major Shareholders”.

After completion of the capital increase, our controlling shareholder VID and BNDESPar on May 5, 2009 executed a shareholders’ agreement which provides that (a) 21.04% of the total capital of VCP held by BNDESPar will be bound to the agreement for 3 years after its execution, such that BNDESPar and VID will together hold at least 50.1% of the voting capital of VCP during this period; (b) the approval of certain matters will depend on the affirmative vote of BNDESPar; (c) between the 3rd and 5th year after its execution the shareholders’ agreement will subject only 10.94% of the shares held by BNDESPar to the terms of the agreement; and (d) from June 2014 onwards none of the BNDESPar shares will be bound by the terms of the agreement. See “Item 10. Additional Information—C Material Contracts—Shareholders’ Agreement of Aracruz”.

Conversion of preferred shares into common shares

On May 30, 2009, at an Extraordinary Shareholder Meetings of VCP, the conversion of its preferred shares into common shares at the exchange ratio of 0.91 common shares for one preferred share (VCP Conversion) was ratified and, thereafter, subsequently ratified by a majority of the company’s preferred shareholders at a Special Meeting held on the same day. Preferred shareholders who do not wish to their shares to be converted have a 30-day period that ends on July 2, 2009, to inform the company that they, instead of converting their shares, choose to redeem the shares for the respective book value per share. If a significant amount of VCP preferred shareholders choose to exercise this appraisal right, the conversion of VCP preferred shares into common shares may be cancelled. If the conversion occurs, VCP’s capital stock will consist only of common shares. VCP’s ADSs will represent common shares.

In addition, also on May 30, 2009, the common shareholders of Aracruz convened at an Extraordinary Shareholder Meeting and voted to approve a recapitalization of Aracruz consisting of the conversion of Aracruz’s Class A Preferred and Class B Preferred Shares into common shares of Aracruz at the ratio of 0.91 common share for each and every one of Aracruz’s Class A Preferred and Class B Preferred Shares (Aracruz Conversion). Pursuant to the Brazilian Corporate Law, corporate transactions that alter the features of a company’s class of shares, including the Aracruz Conversion, must be approved by Aracruz’s common shareholders and ratified by holders of a majority of the issued and outstanding class of the affected stock, voting as separate classes.

The Class A Preferred and Class B Preferred Shareholders of Aracruz were invited, on first call, to convene at Special Shareholder Meetings of Preferred Shareholders of Aracruz scheduled for May 30, 2009 to deliberate on the Aracruz Conversion. However, the required quorum under the Brazilian Corporate Law to convene the May 30 Special Meetings was not obtained.

As a result, on June 19, 2009 Aracruz published a second call for Special Shareholder Meetings of Preferred Shareholders of Aracruz to be held on July 10, 2009 in order to submit the Aracruz Conversion to the approval of holders of Aracruz’s Class A Preferred and Class B Preferred Shares.

Although the common shareholders of Aracruz have already voted in favor of the Aracruz Conversion at the May 30, 2009 Extraordinary Shareholder Meeting, their resolution does not by itself have the power, under the Brazilian Corporate Law, to convert Aracruz’s Class A Preferred or Class B Preferred Shares into Aracruz common shares. In order for the Class A Preferred and Class B Preferred Shares of Aracruz to be converted into Aracruz common shares, both the Class A Preferred and B Preferred Shareholders must approve the Aracruz Conversion at the Special General Meetings voting as separate classes. If only one of the classes of Aracruz’s Preferred Stock approves the Aracruz Conversion, that class will not be converted into Aracruz common shares unless the other class of Aracruz’s Preferred Stock also approves this transaction.

If the Aracruz Conversion is not ratified by Aracruz’s preferred shareholders at the Special General Meetings, we may evaluate alternative methods of effecting the corporate reorganization following our acquisition of additional interest in Aracruz, if at all.

 

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Merger of shares issued by Aracruz into VCP

As part of the corporate reorganization following our acquisition of additional interest in Aracruz, our management and Aracruz’s management intend to call an Extraordinary Shareholder Meeting of each company to vote a business combination under the Brazilian Corporate Law known as a merger of shares (incorporação de ações). Pursuant to the merger of shares, subject to the approval of both companies’ common shareholders, all the issued and outstanding Aracruz shares not held by VCP will be exchanged for VCP common shares (assuming the VCP Conversion).

As in most corporate actions submitted to a vote of a corporation’s shareholders, under the Brazilian Corporate Law the preferred shares of either the acquirer or the target of a merger of shares do not have voting rights in connection with this corporate action.

The merger of shares is not an exchange offer, since, if the transaction is approved, Aracruz shareholders will not have the option to hold on to their Aracruz shares. They will either agree to have their Aracruz shares exchanged for VCP common shares or exercise appraisal rights, to the extent available, as further explained below.

Set forth below is a diagram that illustrates the effect of the merger of shares, if approved and consummated, to the capital structure of VCP.

This excerpt taken from the VCP 20-F filed Feb 1, 2007.

Recent Developments

          On January 2, 2007, VCP created a new subsidiary LA Celulose e Papel Ltda. (“LA”) as part of the asset exchange agreement with International Paper. This wholly-owned subsidiary has no significant assets or liabilities.On January 2, 2007, VCP transferred to LA the assets of the Luiz Antonio mill and related forests. On February 1, 2007, VCP will transfer LA to International Paper and receive Chamflora (currently an International Paper subsidiary) in exchange. Chamflora has contracted an internationally recognized engineering and construction company, Poyry, on an EPC Engineering, Procurement and Construction, or EPC, basis to build the Três Lagoas mill as a turn-key project. Chamflora has already paid Poyry for the EPC, which has in turn transferred to a commercial bank acting as the Trustee Bank (“Trustee”) the corresponding funding of this project. These resources have been and will continue to be disbursed by the Trustee in accordance with the physical construction schedule of the project, which also contemplates the orders with third parties to supply equipment and services being rendered in Três Lagoas to Chamflora. Chamflora is accounting for these EPC disbursements as a “Construction in Progress”. Upon the completion of the construction and start-up of the mill, these costs will be transferred to the appropriate fixed assets accounts. See Item 4C “Organizational Structure” and Item 10.C “Additional Information – Material Contracts.”

This excerpt taken from the VCP 20-F filed Jun 30, 2005.

Recent Developments

     On April 18, 2005, we announced our unaudited interim financial results for the first quarter of 2005. International pulp consumption was greater than expected, which caused an increase in prices worldwide, while pulp and paper sales in the domestic market were lower than expected. Export volumes of paper decreased 13% when compared to the first quarter of 2004, while domestic sales remained flat. Economic stagnation in Europe counts for most of this decrease.

     Net revenue increased 1%, while sales volumes decreased 7% when compared to the same period in 2004, due to an 11% decrease in export, partially offset by a 2% increase in sales in the domestic market. The percentage of revenues from the paper business remained stable in 59% of total sales, and the revenues from the pulp business also remained flat in 41%, when compared to the first quarter of 2004.

     Net income was U.S.$61 million in the first quarter of 2005, compared to U.S.$80 million in the same period in 2004.

     Capital expenditures were U.S.$36 million in the first quarter of 2005, of which U.S.$20 million were invested in forestry (land acquisition, planting and forest maintenance), compared to U.S.$41 million in the same period in 2004, of which U.S.$ 28 million were invested in forestry (land acquisition, planting and forest maintenance).

     On March 31, we concluded the acquisition, jointly with Suzano Papel e Celulose S.A., of the capital stock of Ripasa S/A Celulose e Papel.

     On May 20, 2005, we signed a financing agreement with BNDES in the total amount of U.S.$ 62 million, with the purpose of raising and maintaining eucalyptus forests in the state of São Paulo. This financing will mature in July 2015.

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