Amec requests the revision of tender offer rules and the creation of a regulation for appraisal reports

In a letter sent to the CVM’s Board on August 15, Amec requested that the regulator carry out a complete revision of the Instruction 361. Edited in 2002, the instruction regulates tender offers. Amec’s request is motivated by the constant imbroglios involving tender offers, primarily those resulting from the indirect change of control.
This year, two operations called the market’s attention and showed that the regulatory framework needs to be urgently revised. In June, Enel acquired 73% of Eletropaulo’s control after defeating Neoenergia. The dispute involved public disagreements and CVM had to clear up doubts regarding the bid itself, in addition to informing of the eventual inclusion of another company interested in Eletropaulo. The CVM also had to provide explanations about State Grid’s offer. After that the regulator’s technical staff questioned the price offered to the minority shareholders, the regulator had, once again, to express itself. In the vote casted by the Chairman Marcelo Barbosa, supported by the regulator’s directors, the CVM understood that it is not up to it to establish the minimum price of a tender offer; it is up to the bidder to question values it considers technically inappropriate.
In the letter, Amec recognizes it is a complex matter and suggests that the new framework be designed by a working group with representatives from several market’s entities. Another idea is to reinforce the role of the Brazilian Takeover Panel (CAF) “as a body that can actually be the gatekeeper of the appraisal discipline.” In Amec’s opinion, the CVM should also make it clear that it not only can but also has the duty of rejecting tender offers with unfair or unequal prices, including the possibility of starting sanctioning processes against bidders that try to present “roughly undervalued offers.”
Another suggestion made by Amec is that all acquisitions of controlling shares are conducted under the terms of the Article 257 of the Corporate Law – the provision regulates the acquisition of control via tender offers – and not under the terms of the Article 254-A. This change would lessen the discussions about the occurrence of transfer or acquisition of control, topics that have always been controversial. Amec understands that it is necessary “to start a complete revision of the tender offer system in Brazil through the editing of a “New Instruction 361” based on discussions with the market’s participants,” the letter summarizes.
The President Letter No. 10 is available here.