Brazil: Hostile Takeover Bids In Brazil

Last Updated: 10 December 2010
Article by Walter Stuber

On November 25, 2010, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM) issued CVM Instruction No. 487, which amends and updates CVM Instruction No. 361, of March 5, 20021, and introduces specific provisions to regulate the hostile takeover bids in Brazil, regarding the control acquisition of publicly-held corporations with dispersed shareholding and undefined ownership (i.e., without a controlling shareholder or group of control2).

In 2002, at the time that the rules of CVM Instruction 361/2002 were drawn up, the possibility of hostile takeover bids, which were common in developed markets like the USA and England, seemed rather remote and were unusual in Brazil because the control of Brazilian publicly-held corporations was concentrated in hands of family groups that owned the majority of the voting shares of such companies and tender offers were only made by the current or new controlling shareholder(s). After eight years, however, the situation is completely different. The Brazilian capital markets have expanded rapidly, both in terms of volume and number of companies with shares quoted in the stock exchange, there are more than 50 publicly-held corporations with dispersed shareholding3 and market takeovers begin to appear.

The first attempted hostile takeover in Brazil was made by Sadia, a food processor company, that in 2006 launched an ultimately unsuccessful bid for its rival Perdigão. The case that changed everything and was instrumental to induce CVM to revise and change the rules adopted in 2002 was the successful and controversial bid made in 2009 by Vivendi, the French telecom and media conglomerate, that acquired the GVT Holding, a Brazilian telecom operator. Vivendi was the winner of a dispute involving Telefonica, the Spanish carrier, which was also very interested in GVT. It all started when Vivendi made a tender offer for all the shares of GVT, Telefonica responded with a counter offer and the BM&FBovespa, the Brazilian stock exchange, set an auction. Before the auction took place, however, Vivendi negotiated with funds that held shares and options on shares in GVT. Using derivatives instruments, Vivendi obtained the right to acquire more than 50% of GVT´s common shares through stock exchanges purchases and direct negotiations. Therefore, Vivendi achieved its objective of acquiring the control of GVT without having to make a tender offer.

The new rules approved by CVM aim to avoid "surprises" like the GVT episode and give more transparency to tender offers and also intend to protect the minority shareholders, that many times are forced to accept a tender offer with fear of staying with shares without any liquidity.

The main changes introduced by the new rules are outlined below.

I. Confidentiality

The duty of confidentiality that the offerer must obey before making the tender offer is more detailed and includes the procedures to be observed in case the information about the launching of the offer escapes to his/her/it control.

Pursuant to the provisions of new article 4-A, the offerer must keep confidentiality regarding the takeover bid until its release to the market as well as ensure that his/her/its administrators, employees, advisors and third parties he/she/it trusts do the same. This obligation is valid: (i) until the date in which the material fact regarding the tender offer is disclosed, when the offer is subject to registration with CVM, as required under the terms of article 9 of CVM Instruction No. 358, of January 2, 2002; or (ii) the date of publication of the notice (edital) of the tender offer in the newspapers of large distribution normally used by the target company to divulgate its announcements to the public, when the offer is not subject to registration with CVM.

If the information escapes to the offerer´s control, then the prospective offerer shall immediately: (i) publish the notice of the tender offer; or (ii) inform to the market that he/she/it is interested in making the takeover bid, or is considering such possibility, even though is not yet sure whether he/she/it will make it or not. In this later case, CVM may define a term for the offerer to publish the notice or announce clearly to the market that he/she/it does not intend to make the tender offer within a six month-period.

II. Mandatory Requirements for Third Parties

Any third party that is interested in interfering in the auction of a takeover bid will need to identify himself/herself/itself with a 10 days written notice of the auction date.

By force of paragraph 4 of article 12, any interested person that would like to interfere in the auction of a takeover bid as another offerer must announce his/her/its intention by publishing a notice, disclosing the following information:

  1. identification of the target company, the intermediary institution, and the offerer, including, in relation to the later, when it is the case, the identification of his/her/its controller, with the description of its business purpose, sector where it acts, and activities developed by it;
  2. number, class and kind of the shares to be acquired;
  3. number, class, kind and type of securities of the target company that are held by the offerer or any person entailed to the offerer;
  4. number, class, kind and type of securities of the target company used as a loan, having as borrower or lender either the offerer or any person entailed to the offerer;
  5. exposure of the offerer or any person entailed to the offerer in derivatives referenced in securities of the target company;
  6. detailed information about contracts, pre-contracts, options, letters of intent or any other legal acts disposing about the acquisition or alienation of securities of the target company, whereby the offerer or any person entailed to the offerer is a party or beneficiary; and
  7. detailed description of contracts, pre-contracts, options, letters of intent or any other similar legal acts entered within the last six months between: (i) the offerer or any person entailed to the offerer; and (ii) the target company, its administrators or shareholders holding shares representing more than 5% of the shares to be acquired pursuant to the tender offer or any entailed person.

III. - Auction Rules for Control Acquisition

Adaptation of the auction rules for takeover bid of the target company, with express prohibition of: (a) interference by third parties for a lot inferior to the one that the offerer intends to acquire, and (b) increase of the price in the auction by the bidder if a competitor bid has been launched.

According to article 12, the tender offer shall be necessarily made in auction in the stock exchange or in the organized-over-the counter market in which the shares object of the tender offer are admitted for negotiation.

Paragraph 1 of the same article 12 establishes that the auction shall adopt procedures that necessarily assure: (i) the possibility of increasing the price to be paid for the shares during the auction, being the new price extended to all shareholders that accept the previous calls, by observing the differentiation of prices among the several classes or kinds of shares, if existing, an the possibility of increasing the price of just one or some classes or kinds of shares, and also complying with the provisions of paragraph 7 of the same article 12 (see comment below); and (ii) the possibility of buyer interferences, which can comprise a lot of shares inferior to the respective tender offer, proceeding the apportionment, except for the tender offer for the cancellation of registration, for increase of participation and for control acquisition (takeover bid), in which the interferences shall comprise the total lot.

Pursuant to paragraph 6 of said article 12, at the request of the offerer CVM may authorize the offer to be made through different means other than the auction.

Paragraph 7 of article 12 clarifies that, in case of control acquisition, the offerer cannot increase the price in the auction, in the event that the notice has been published or if registration for competitor control acquisition has been applied with CVM.

IV. Total Takeover Bid

New article 32-A determines that, in case of total takeover bid to acquire the controlling interest, the addressees of the offer are not compelled to sell immediately and they will have the sale option for the next 30 days after the auction. In practice, this provision gives the minority shareholders the opportunity to accept the offer after the auction, preventing them from being coerced to sell their shares at a price they deem inappropriate when the auction is made.

V. Partial Takeover Bid

In case of partial takeover bid, the new Article 32-B creates an auction procedure that allows the addressees of the offer to accept it conditionally. They will only sell their shares if the offer is successful. For this to happen, the offer must be unconditionally approved by holders of a number of shares which ensures to the offerer the control of the company. Again, the purpose of this procedure is to guarantee freedom of shareholders to choose whether to accept or refuse the offer.

VI. More Transparency

In new articles 32-C to 32-G, there is a substantial increase in the quantity and quality of information to be disclosed in case of takeover bid by the offerer, the target company, its administrators and principal shareholders, especially as the businesses they conducted involving shares and derivatives during the tender offer period.

VII. Appraisals

There are also improvements in the rules governing the appraisal reports to be hired by the offerer in some of the modalities of tender offer, about the work and responsibility expected of the evaluators, which from now on are obliged to require consistency from the information they receive to prepare their appraisal reports.


These new rules are already in full force and effect and bring more transparency for the entire takeover bid process, not only for the investors but also for the administrators of the target company. The reform made by our regulator through CVM Instruction 487/2010 is particular important at this stage of the Brazilian capital markets because the number of our publicly-held corporations with no defined controller and dispersed capital has increased.


1 CVM Instruction 361/2002 regulates the procedure applicable to any tender offer (in Portuguese, Oferta Pública de Ações - OPA) for publicly-held corporations shares, and also the process of registering tender offers for cancellation of registration for negotiation of securities in regulated markets, through the increase of participation of a controlling shareholder, through the alienation of publicly-held corporation control, for the control acquisition of a publicly-held corporation when involving securities exchange, and exchange for securities.

2 For the purpose of current regulations, "controlling shareholder" is the person, individual or legal entity, fund or universality of rights or the group of people entailed by vote agreement, or under common control, direct or indirect, that: a) is titular of partnership rights that assure him/her/it in a permanent way, the majority of votes in the decisions of the general meeting and the power of electing the majority of officers in the company; and b) effectively uses his/her/its power to coordinate the social activities and to orient the operation of the company bodies (as defined by item IV of article 3 of CVM Instruction 361/2002).

3 This change occurred during the last few years, with the adoption of the "100% common shares model" (i.e. all shares must have voting rights), which is a demand from the New Market (Novo Mercado), the listing tier on the BM&FBovespa that requires high corporate governance standards. Several entrepreneurs chose to become part of this select group in order to attract the interest of investors in their public offerings. Consequently, without the possibility of issuing preferred shares with nonvoting rights, these entrepreneurs had to find funding by issuing common shares, giving up in some instances majority control. Therefore, the corporate capital of those companies that adhered to the Novo Mercado became more dispersed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Walter Stuber
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions