Previ asks court to suspend shareholder vote, cites lack of transparency.
Previ, Brazil’s largest pension fund and the retirement fund for employees of Banco do Brasil, has filed an interlocutory appeal in court in an attempt to suspend the shareholder meeting scheduled for Monday, July 14, which will deliberate on the proposed merger between food giants Marfrig and BRF. The appeal includes a request for an injunction to bring forward the effects of the ruling.
At the same time, shareholders have already filed for arbitration to challenge the share exchange ratio outlined in the proposed merger, as provided for in the companies’ bylaws. Both Marfrig and BRF are listed on B3’s Novo Mercado, which requires high governance standards. However, because the meeting has already been called, shareholders are also seeking an urgent ruling in civil court through a preparatory injunction ahead of the arbitration process.
In the court filing, obtained by Valor, Previ and fellow shareholder Alex Fontana argue that the lower court decision allowing the meeting to proceed should be reversed. They claim that BRF failed to comply with a request from Brazil’s securities regulator, the CVM, by submitting documents with redacted information. According to the plaintiffs, the company did not adequately explain how the independent committees reached the proposed share exchange ratio of 0.85 Marfrig share per BRF share.
“No expectation, assumption, projection or estimate was presented to justify how (and why) the so-called ‘independent’ committee members found the valuation of each company appropriate,”
said the filing, signed by the law firms Chiarottino and Modesto Carvalhosa.
The meeting was originally scheduled for June 18, but after a request from Previ, CVM asked the companies for further information and recommended a 21-day postponement from the date the documents were submitted. The companies provided the materials and rescheduled the vote for July 14.
“When reconvening their general meetings, the companies released three presentations prepared by Marfrig’s financial advisor (JP Morgan) and one by BRF’s advisor (reportedly Citibank), but redacted all— absolutely all — information contained in these presentations,”
Previ complained to the CVM in a filing submitted late last month. The regulator has yet to comment on the new disclosures.
In the appeal, BRF minority shareholders reiterate that the proposed share exchange ratio is “inexplicable” and favors the controlling shareholder. Previ claims the financial advisors involved had higher target prices for BRF stock than the valuation used in the merger proposal.
The minority shareholders stress the need for proof of fair negotiations and terms, especially given that this is a related-party transaction. They argue that beyond forming an independent committee, the process must ensure all documents are made available to avoid information asymmetry with the controlling party. “All documentation must be fully accessible to shareholders,” the filing says.
They also question the independence of the committee members, claiming some had close ties to the companies’ controlling shareholder, Marcos Molina. Furthermore, they argue that negotiations between the two committees were superficial, lasting fewer than eight business days.
Source: Valor International
