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SEMINÁRIO DE PRIVATE EQUITY: EMISSÃO DE AÇÕES NO EXTERIOR
DONALD BAKER Tel: 55-11-3147-5601
Dec 13, 2006 E-mail: [email protected]
WHITE & CASE LLP
Topics
I. The Initial Decision: Do You Want to Be a Public Company
II. Planning for the Offering
III. Starting the Process
IV. U.S. Securities Laws
V. Registration Process
VI. The Underwriting Process
VII. Keys to Success
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I. The Initial Decision: Do You Want to Be a Public Company
Benefits: Access to Capital Liquidity of Securities
Exit Strategies for stockholders Employee incentive arrangements Currency for acquisitions Marketing of Brand
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I. The Initial Decision: Do You Want to Be a Public Company
Burdens: Expenses Regulation Market Pressure to Perform Fiduciary duties Risks of aborted offering
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II. Planning for the Offering
Corporate Governance Structure Corporate Structure - “Novo Mercado” Committees – Audit vs. Fiscal Council Independent Directors Whether to adopt “anti-takeover” provision
Investor Relations Director Public Relations/Media Relations Firm Website
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II. Planning for the Offering
Remuneration of Members of Board of Directors (Conselho da Administração) and Directors (Diretoria)
Profit Sharing Plan Long-term incentive plan : Stock Option vs. Phantom Stock vs. Bonus
Participants as shareholders, not just employees Attract talented management Do not generate cash expenses (vs. dilution)
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II. Planning for the Offering
Selecting an Underwriter: Analysts in the Industry Personal Relationship Underwriter Horsepower Valuation Commitment to your transaction
Selecting Others in Team: Attorneys Auditors
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III. Starting the Process
All Hands Organizational Meeting Scheduling the offering:
Timetable Financial Statements to be included/Timetable for delivery
Structuring the offering Primary vs. Secondary
Status Check on Acquisitions and other Developments“Quiet Period” Begins
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IV. U.S. Securities Laws
General Under the Securities Act of 1933, generally each offer and sale of a security must
be registered or exempt Some limited security exemptions, including:
Rule 144A Regulation S Regulation D
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IV. U.S. Securities Laws
To Whom May Offer Be Made
144A Offering
Qualified Institutional Buyers “QIBs” US$100 million in securities assets US$25 million for broker dealers Determine status from published source or by certificate
No General Advertising or Solicitation
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IV. U.S. Securities Laws
Regulation S Offering
Rule 903: Two basic conditions:
1. Offshore transaction
2. No directed selling efforts in U.S.
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V. Registration Process
Drafting the Prospectus Industry precedents are helpful Underwriters’ Preferences Methodology
Painstaking care
Verification of each sentence Capturing the essence of the company
Timing Allocation of resources to process
Due diligence point person Chief financial officer – projections and financial information
(cont.)
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V. Registration Process
Prepare Registration Statement Front cover Due Diligence Process (include all material information and no material
misstatements) Prior preparations is key Legal due diligence vs. management due diligence
(cont.)
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V. Registration Process
Due Diligence Defense Underwriters must conduct a due diligence investigation in order to benefit
from certain defenses under the U.S. Securities Act of 1933 in the event of material misstatements or omissions in the Offering Document.
There is no due diligence defense for Issuers:
Issuers are strictly liable (without defenses) for errors and omissions in Offering Document.
Expertized (e.g., audited financials) vs. non-expertized portion
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What constitutes a reasonable investigation? It depends on the circumstances, including: Nature of Issuer (i.e., size, type, stability of business, whether it is regulated,
financial condition, earnings history) Type of offering; Quality of management, auditors and outside counsel; and Time available for investigation.
(cont.)
V. Registration Process
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Plain English Non-Financial Disclosure MD&A (Management Discussion and Analysis) Financial Statements
Audited financial statements required Income/Cash Flow Statements - three most recent fiscal yearsBalance Sheet - two most recent fiscal years
V. Registration Process(cont.)
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VI. The Underwriting Process
Signing an underwriting agreement Day of pricing Close 3-5 business days thereafter Comfort letter Bring-Down Due Diligence Deliveries at closing
Accountant’s comfort letter Attorneys opinions – “10b-5” opinion Shares Certificates, etc. Green-shoe closing: Over-allotment of 15% “Lock-Up”: 180 days
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VI. The Underwriting Process
Representations and warranties
Typically, an underwriter in an IPO will seek extensive reps and warranties from: Company Selling Shareholders Representations and warranties
“Insiders” vs. “Non-insiders” Registration Rights Agreement - provisions
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VII. Keys to Success
Advance Preparation Anticipate due diligence requests
Anticipate accounting issues
Complete acquisitions/intellectual property work and other major corporate developments
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VII. Keys to Success
Depth and Expertise in Management
Market expectations
Challenges of workload and timing
Road show presentations
Selecting the Right Deal Team
(cont.)
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