Exhibit 99.2
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AGREEMENT OF MERGER OF TELE
NORDESTE CELULAR PARTICIPACOES S.A.
INTO TELE CELULAR SUL PARTICIPACOES S.A.
By this private instrument, the Parties hereunder:
TELE CELULAR SUL PARTICIPACOES S.A., a corporation with head office at Xxx
Xxxxxxxxxx Xxxxxx xx. 000, Xxxxx Xxxxx, Xxxxxxxx, Parana, registered with
CNPJ/MF Corporate Taxpayer Roll under no. 02.332.397/0001-44, and its Directors
and Officers, represented herein by its Officers (hereinafter referred to simply
as "TSU" or "Surviving Entity");
TELE NORDESTE CELULAR PARTICIPACOES S.A., a corporation with head office at Av.
Xxxxxx Xxxxx xx Xxxxx no. 1.633, Jaboatao dos Guararapes, Pernambuco, registered
with CNPJ/MF Corporate Taxpayer Roll under no. 02.558.158/0001-18, and its
Directors and Officers, represented herein by its Officers (hereinafter referred
to simply as "TND" or "Merged Entity", also referred to, individually, as Party
and, collectively, as Parties);
Whereas, the Parties' Directors and Officers concluded that the merger of TND
into the Surviving Entity would be advisable so as to optimize and integrate the
administrative structures of such companies, thus reducing administrative and
operating costs, and enabling the concentration of liquidity of the shares
issued by the Parties;
Whereas, the Parties' Directors approved, on May 31, 2004, a preliminary
version of this Agreement of Merger (the "Preliminary Agreement"), which was
signed on the same date;
Whereas, the appraisal reports referred to in sections 11.3 and 13.1 of the
Preliminary Agreement have been prepared and the Boards of Directors of the
Parties held their meetings on the present date, as established on section 11.4
of the Preliminary Agreement;
Whereas, the Parties' Directors approved, on July 19, 2004 (1) the timely
submittal of the captioned merger to the appreciation of their shareholders and
(2) the execution of this Agreement of Merger, since all information and
necessary documents for final execution are now available;
The Parties have decided to execute, under the best legal terms, this Agreement
of Merger (the "Agreement"), which is the final version of the Preliminary
Agreement and replaces it for all legal purposes. The Agreement sets forth,
pursuant to articles 224 and 225 of Law no. 6404/76, the basic conditions for
the merger of the Merged Entity into the Surviving Entity, which shall be
submitted in due course to the deliberation of the Parties' shareholders, as
required by law:
AGREEMENT
Section One - NET WORTH.
1.1 The equity of the Merged Entity that will be absorbed by the Surviving
Entity shall consist of the assets and liabilities appraised by a specialized
company, pursuant to section two hereunder and reflected on the financial
statements of June 30, 2004 (basis date for the merger), which have been audited
and attached to the book value appraisal report, prepared based on the
aforementioned financial statements of June 30, 2004. Said report has been filed
in TSU's headquarters.
Section Two - APPRAISALS.
2.1 Appraisal based on Economic Value. The Merged Entity and the Surviving
Entity were appraised by Banco ABN-AMRO Real S.A., a financial institution with
head office at Xx. Xxxxxxxx, 0000, 00xx Xxxxx, Xxxxxx, Xxx Paulo, SP,
registered with CNPJ/MF Corporate Taxpayer Roll under no. 33.066.408/0001-15,
especially engaged therefor, which produced the reports that shall be kept at
TSU's headquarters. The Merged Entity and the Surviving Entity were appraised
based on net financial positions, audited on the same basis date (March 31,
2004), at their economic value, through the present value discounted cash flow
method. The value of the net indebtedness used in the Appraisal of TND included
the payment of R$31.5 million, made on April 8, 2004, regarding the exercise of
withdrawal rights by the minority shareholders of Teleceara Celular S.A.,
Telepisa Celular S.A., Telern Celular S.A., Telpa Celular S.A. and Telasa
Celular S.A, related to their merger into Telpe Celular S.A. That appraisal
resulted in a range of amounts of equity value, employing a variation of the
discount rate and a variation of the cash flow growth rate on a perpetuity
basis. The average point of the aforementioned range of amounts is listed in the
following table:
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COMPANY AVERAGE POINT OF THE ECONOMIC VALUE
RANGE IN ECONOMIC VALUE PER SHARE
ON 03/31/04 ON 03/31/04
(in thousands of R$) (in R$)
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TND 2,456,095 R$ 0.0068364
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TSU 2,631,349 R$ 0.0073815
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There is no evidence or indication of any material event that may or might have
relevant impact on the economic, financial and/or operational conditions of TND
and/or TSU between the projection date of the economic appraisal (March 31,
2004) and the present date, that would justify an alteration on the appraisal
results indicated above.
2.2 Appraisal based on Book Value. The appraisal based on book value was
prepared by ACAL Consultoria e Auditoria S.S. ("ACAL"), a company with head
office at Xx. Xxx Xxxxxx, 000, 00xx Xxxxx - Xxxxxx, Xxx xx Janeiro, RJ,
registered with CNPJ/MF Corporate Taxpayer Roll under no. 28.005.734/0001-81,
especially engaged therefor, which has presented the reports that shall be kept
at TSU's headquarters, under which the Merged Entity and the Surviving Entity
have been appraised, on the same basis date (June 30, 2004), based on their book
value, through the analysis of the financial statements of the Merged Entity and
the Surviving Entity. The net worth accounts of TND (including, but not limited
to, the special premium reserve and the profit reserves) shall be transferred to
the net worth accounts of TSU. As to the special premium reserves transferred
from TND, TSU shall succeed TND's obligations to capitalize such reserves, as
established in prior agreements of merger and spin-off. The table below shows
the results of such appraisal:
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COMPANY BOOK VALUE ON BOOK VALUE PER SHARE
06/30/04 ON 06/30/04
(in thousands of R$) (in R$)
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TND R$ 955,105 R$ 0.002611163
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TSU R$ 977,452 R$ 0.002687090
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2.3 Appraisal based on Book Value Adjusted to Market. Pursuant to article 264 of
Law 6404/76, the appraisal based on book value adjusted to market values was
conducted by ACAL, especially engaged therefor, which has presented the reports
that shall be kept at TSU's headquarters, under which the Merged Entity and the
Surviving Entity have been appraised, on the same basis date (June 30, 2004),
according to their book value adjusted to market values, as laid out below:
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COMPANY BOOK VALUE ADJUSTED TO BOOK VALUE ADJUSTED
MARKET ON 06/30/04 TO MARKET PER
(in thousands of R$) SHARE ON 06/30/04
(in R$)
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TND R$ 829,792 R$ 0.002268570
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TSU R$ 818,905 R$ 0.002251232
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Section Three - EXCHANGE RATIOS.
3.1 Based on the economic value appraisal report referred to in section 2.1
above, the respective Boards of Directors of TSU and TND agreed upon the
exchange ratio set forth in column 4 of the table shown on section 3.3 below,
which falls within the value range established by the valuation conducted by
Banco ABN-AMRO Real S.A. ("ABN AMRO"). Such valuation was prepared on the basis
of the discounted cash flow of the Merged Entity and of the Surviving Entity on
March 31, 2004. This transaction is deemed equitable since the exchange ratios
for replacement of the shares of the Merged Entity (TND) by the shares of the
Surviving Entity (TSU) fall within the economic value range proposed by ABN
AMRO. Furthermore, Xxxxxx Xxxxxxx & Co. Incorporated, a U.S. entity with
headquarters on 0000 Xxxxxxxx, Xxx Xxxx, XX, issued an opinion on July 12, 2004,
stating that the number of shares to be issued by TSU and given to the
shareholders of TND, as determined according to the exchange ratios mentioned in
item 9 above, is fair to the shareholders of TND, at the financial point of
view.
3.2 The shareholders and ADS (American Depositary Shares) holders of the Merged
Entity will receive the following amounts of shares and ADSs, respectively:
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TYPE AND NUMBER OF TSU-ISSUED
SHAREHOLDER / ADS HOLDER OF SHARES / ADSs TO BE RECEIVED
MERGED ENTITY (TND) (PER INDIVIDUAL TND SHARE / ADS)
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COMMON SHAREHOLDERS OF TND 0.9261 COMMON SHARE
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PREFERRED SHAREHOLDERS OF TND 0.9261 PREFERRED SHARE
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ADS HOLDERS OF TND 1.8522 ADS(1)
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(1) The exchange ratio for TND ADSs is different from the exchange ratio for
common and preferred shares, since the exchange ratio for ADSs takes into
consideration the difference between the ADS/ preferred share ratio under TND's
ADS program, wherein each ADS represents 20,000 preferred shares, and under
TSU's ADS program, wherein each ADS represents 10,000 preferred shares.
3.3 Exchange Ratio and Calculation of Exchange Ratio based on Book Value
adjusted to Market of the Merged Entity and the Surviving Entity, for purposes
of the Comparison set forth in art. 264 of Law no. 6404/76, and of the
Reimbursement Value based on the Book Value. Because this transaction will be
effected between companies controlled by the same parent, which entails the
applicability of art. 264 of Law no. 6404/76, ACAL ascertained the following
book value adjusted to market of the Merged Entity and the Surviving Entity on
June 30, 2004, according to the following table:
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Company Book Value Exchange ratio Exchange ratio Reimbursement Value
Adjusted to calculated proposed based on per Share calculated
Market per based on book economic value based on Book Value
Share (in R$) value adjusted (per individual of Merged Entity
to market - share) (TND)
Art. 264 - Law (in R$)
6404/76
(1) (2) (3) (4) (5)
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TND R$ 0.002268570 1.0077 0.9261 R$ 0.002611163
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TSU R$ 0.002251232 N/A
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Pursuant to the provisions of Section 3 of art. 264 of Law 6404/76, since the
exchange ratio set forth in column "3" above is more advantageous than the
exchange ratio set forth in column "4" above, the common shareholders of TND who
dissent on the deliberation relating to the merger will have the option of
exercising their right to withdraw, based on the book value adjusted to market
(column "2" above) or based on the book value (column "5" above) of the Merged
Entity, drawn on June 30, 2004, based on a balance sheet to be approved at the
general shareholders meeting.
3.4 As provided in paragraphs "a" and "b" of item II of art. 137 of Law 6404/76,
further detailed in section 6.2 hereunder, holders of preferred shares of TND do
not have the right to withdraw.
Section Four - NET WORTH VARIATIONS.
4.1 Any variations in the net worth of TND after the basis date of the Balance
Sheet of the Merged Entity (June 30, 2004) shall be accounted for by the Merged
Entity and, once the merger is executed, the Surviving Entity shall absorb any
such changes in equity into its accounting books.
Section Five - CAPITAL STOCK, OTHER NET WORTH ACCOUNTS AND EQUITY INTERESTS.
5.1 The net assets of the Merged Entity will revert to the net worth of the
Surviving Entity. Any balances in the credit and debit accounts of the Merged
Entity will be transferred to the accounting books of the Surviving Entity,
account by account, with any necessary adjustments. The merged Entity will be
extinguished by operation of law.
5.2 As a result of the captioned merger, the capital stock of the Surviving
Entity will be increased by R$ 428,237,919.90 (four hundred and twenty-eight
million, two hundred and thirty-seven thousand, nine hundred and nineteen reais
and ninety cents), represented by 127,594,750,755 (one hundred and twenty-seven
billion, five hundred and ninety-four million, seven hundred and fifty thousand,
seven hundred and fifty-five) common shares and 211,151,865,760 (two hundred and
eleven billion, one hundred and fifty-one million, eighty hundred and sixty-five
thousand, seven hundred and sixty) preferred shares of the Surviving Entity,
that shall replace the shares of the Merged Entity to be cancelled by virtue of
the merger, and that shall be assigned to the holders of such cancelled shares
as indicated in the table in section 3.2 above.
5.3 All other net worth accounts of the Merged Entity shall revert to the book
value net worth of the Surviving Entity, to accounts of the same nature existing
in the books of the Surviving Entity, or to new accounts to be created following
the merger.
5.4 The credits generated by the capitalization of the special premium reserves
of XXX Xxxxxxxx Telecomunicacoes S.A. to which the Merged Entity is entitled
shall be transferred to the Surviving Entity by operation of the legal principle
of succession applied to the merger.
5.5 The shareholders of TND that do not hold the minimum number of shares
required to receive at least one share of TSU, shall have the right to become
shareholders of TSU, the entity that will succeed TND, provided that their
intention to become a shareholder is notified to TSU in writing, within 30
(thirty) days from the publication of the minutes of the Special Shareholders'
Meeting of the Surviving Entity that approves the transaction. As to all other
shareholders of the TND, the share fractions will be grouped and sold at the Sao
Paulo Stock Exchange ("Bovespa"), at market prices, and the net proceeds raised
will be paid proportionately to the holdings of said shareholders within 90
(ninety) days, counting from the publication of the minutes of the Special
Shareholders' Meeting of the Surviving Entity that approves the transaction.
5.6 The amount of the capital increase of the Surviving Entity and its ownership
per common and preferred share shall be the following:
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CURRENT VALUE OF THE PAID UP CAPITAL STOCK R$ 456,265,808.31
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AMOUNT OF CAPITAL INCREASE RESULTING FROM MERGER R$ 428,237,919.90
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VALUE OF THE NEW PAID UP CAPITAL STOCK R$ 884,503,728.21
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Percentage of
TSU Share Type Number Total Capital
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Common 264,793,443,731 37.7%
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Preferred 437,711,795,252 62.3%
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5.7 The shares of TSU shall not be modified in any way, as a result of the
merger, with regards to any equity and political rights they convey. The rights
of the preferred shares of TSU are the same as those of the preferred shares of
TND. Similarly, the common shares of TSU have the same rights as the common
shares of TND.
Section Six - WITHDRAWAL RIGHT
6.1 The merger will grant withdrawal rights to the common shareholders of the
Merged Entity who dissent on the deliberation relating to the merger and who
were the titleholders of common shares of the Merged Entity on June 1, 2004
(date of publication of the Relevant Fact Notice), pursuant to the provisions of
paragraph 1 of art. 137 of Law 6404/76. As established by paragraph 3 of art.
264 of Law 6404/76, the dissenting common shareholders of TND may choose to
exercise their withdrawal right either based on net worth at market prices
(column "2" of section 3.3 above) or on book value net worth (column "5" of
Section 3.3 above).
6.2 Since: (a) the preferred shares issued by TND are part of the portfolio used
in the calculation of the Bovespa index (liquidity); and (b) over 50% (fifty
percent) of the preferred shares of TND are in the market, that is to say, are
not held by the controlling shareholder of TND or persons related thereto
(dispersal), the preferred shareholders of TND will not be entitled to
withdrawal right, as established in letters "a" and "b" of item II of art. 137
of Law 6404/76.
6.3 The application/exercise of the right to withdraw by the common shareholders
of TND may be effected within up to 30 (thirty) days after the date of
publication of the minutes of the Special Shareholders' Meeting of the Surviving
Entity that approves the merger contemplated in this Agreement. The intention to
exercise the right to withdraw must be notified through a form, which shall be
filed at any branch of ABN AMRO.
Section Seven - RECONSIDERATION/CANCELLATION OF TRANSACTION
7.1 As provided for in paragraph 3 of art. 137 of Law 6404/76, if the total
value of the reimbursement payments to dissident shareholders compromises the
financial stability of the Surviving Entity, its Board of Directors may call a
new Special Shareholders' Meeting of the Surviving Entity, within 10 (ten) days
of the deadline for exercise of the withdrawal right, for the sole purpose of
confirming or reconsidering the resolution that approved the merger that is the
subject of this agreement.
Section Eight - AMENDMENTS TO THE BY-LAWS OF THE SURVIVING ENTITY.
8.1 The Special Shareholders' Meeting of the Surviving Entity that will decide
on the merger shall also deliberate on the amendment of art. 1 of the By-laws,
so as to change the corporate name of the Surviving Entity, which shall
henceforth be "XXX Participacoes S.A."
8.2 As a result of the merger, the Special Shareholders' Meeting of the
Surviving Entity shall deliberate on the amendment of art. 5 and art. 6 of the
Surviving Entity's By-laws, in order to reflect the new value and composition of
the capital stock as well as the new threshold of the Company's authorized
capital stock.
8.3 The head office of the Merged Entity, located at Av. Xxxxxx Xxxxx xx Xxxxx
no. 1.633, Jaboatao dos Guararapes, in the State of Pernambuco, will become a
branch of the Surviving Entity. Likewise, the branches of TND will become
branches of TSU.
Section Nine - DIVIDENDS
9.1 Participation in Profits as of the Fiscal Year of 2004. The shares issued by
the Surviving Entity as a result of the merger, jointly with the preexisting
shares issued by the Surviving Entity, shall be entitled to all the dividends
referring to the profits accumulated as of January 1, 2004, except for the
dividends to be paid from the "special dividends reserve", transferred from the
Merged to the Surviving Entity, to which only the shareholders who held shares
of TND on April 5, 2002 will be entitled to.
Section Ten - NONEXISTENCE OF OMITTED LIABILITIES
10.1 The Directors and Officers of the Surviving Entity are not aware of any
liability or material contingency unaccounted for by the Merged Entity that may
cause an adverse impact on the net worth or on the activities of the Surviving
Entity after the effectiveness of the merger and the assumption of such
liabilities by the Surviving Entity.
Section Eleven - REVIEW OF MERGER BY REGULATORIES AGENCIES
11.1 The present transaction was registered with the U.S. Securities and
Exchange Commission ("SEC"). The transaction was also presented to the National
Agency for Telecommunications ("ANATEL"), for regulatory matters. Since the
transaction is a merger between companies under the same control, it is not
subject to the approval by the Brazilian antitrust agency (Conselho
Administrativo de Defesa Economica - XXXX).
Section Twelve - CONDITIONS TO THE EFFECTIVENESS OF THE MERGER
12.1 The main conditions to the effectiveness of the transaction are: (i) the
declaration by the SEC that the F-4 form is effective; and (ii) the approval of
the transaction bythe majority of the voting capital of TND and TSU in Special
Shareholders' Meetings.
Section Thirteen - STOCK OPTION PROGRAMS.
13.1 Upon implementation of the merger, the Board of Directors of TSU shall
decide, in due course, on adjustments to be made on TSU and TND employees',
Directors' and Officers' stock option programs. Such stock option programs were
approved at the General Shareholders' Meetings of TSU and TND held on May 2,
2001 and May 4, 2001, respectively, aiming at assuring purpose and basis of such
programs, pursuant to section 8.4 of their regulations.
JUSTIFICATION
Section Fourteen - THE TRANSACTION.
14.1 The corporate restructuring of the Parties by means of the captioned merger
is a result of the intention of their Directors and Officers of integrating the
two companies, which shall (i) increase the liquidity of the securities of the
surviving entity; (ii) turn two regional companies (TND in the North East and
TSU in the South) into one national holding company; and (iii) enable the
reduction of the administrative costs required to maintain two distinct legal
structures, such as publications, registrations, preparation and auditing of
financial statements and maintenance of separate managing bodies.
Section Fifteen - AMENDMENTS TO THIS AGREEMENT AND EXECUTION OF THE FINAL DRAFT.
15.1 Any amendment to this Agreement of Merger shall only be valid if made in
writing, and signed by the legal representatives of the Merged Entity and the
Surviving Entity.
15.2 This Agreement of Merger replaces, for all legal purposes, the Preliminary
Agreement executed between the Parties on May 31, 2004.
Having thus agreed and contracted, the Parties sign this Agreement of Merger in
8 (eight) counterparts of equal content and form, and for one purpose, in the
presence of the undersigned witnesses.
Sao Paulo, July 19, 2004.
TELE NORDESTE CELULAR PARTICIPACOES S.A.
By: /s/ Mario Xxxxx Xxxxxxx xx Xxxxxx By: /s/ Xxxxxx Xxxxxx Kesseli
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Name: Mario Xxxxx Xxxxxxx xx Xxxxxx Name: Xxxxxx Xxxxxx Kesseli
Title: President Title: Chief Administrative Officer
TELE CELULAR SUL PARTICIPACOES S.A.
By: /s/ Xxxxxx X. xx Xxxxxx Filho By: /s/ Paulo R. Xxxx Xxxxx
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Name: Xxxxxx X. xx Xxxxxx Filho Name: Paulo R. Xxxx Xxxxx
Title: Chief Executive Officer Title: Chief Financial Officer
Witnesses:
1._______________________ 2._______________________
Name:____________________ Name:____________________
Id.:_____________________ Id.:_____________________
