PROPOSAL AND JUSTIFICATION OF PARTIAL SPIN-OFF OF CYRELA BRAZIL REALTY S.A. EMPREENDIMENTOS E PARTICIPAÇÕES

Transcription

1 PROPOSAL AND JUSTIFICATION OF PARTIAL SPIN-OFF OF CYRELA BRAZIL REALTY S.A. EMPREENDIMENTOS E PARTICIPAÇÕES The Board of Executive Officers of Cyrela Brazil Realty S.A. Empreendimentos e Participações ( CBR or Company ), pursuant to Articles 223, 225 and 229, paragraph 2 of Law no. 6,404 of December 15, 1976, and further amendments ( Brazilian Corporation Law ), after thorough analysis of the Company s corporate purposes, in line with the Company s future interests, submits this justification of the Company s partial spin-off, by transferring the spun off portion to a new company to be incorporated ( Justification of Partial Spin-Off ) for resolution by the Board of Directors and, should it be approved, for further resolution in the Extraordinary General Meeting ( AGE ). CHAPTER I REASONS AND PURPOSES OF THE OPERATION 1. CBR is a publicly-held company, whose capital stock in March 14, 2007 was one billion, five hundred eighty-one million, five hundred twenty-seven thousand, nine hundred thirty reais (R$1,581,527,930.00), fully subscribed and paid, divided into three hundred fifty-four million, four hundred sixty-four thousand, eight hundred seventyeight (354,464,878) common, registered, book-entry shares with no par value, distributed among its shareholders as follows: Shareholders Number of Ordinary Shares % Eirenor Sociedad Anonima 21,900, Elie Horn 118,609, EH Capital Management 7,502, Janus Capital Management - USA 22,070, Rogério Jonas Zylberzstajn 7,286, Managers 1,229, Treasury 6,000 0 Other 175,860, Total 354,464,

2 2. CBR s corporate purpose is the development, purchase and sale of completed or under-construction real estate, residential or commercial, lands and notional fractions, the rental and management of real estate, the building of real estate, and the rendering of consultancy services in matters related to the real estate market. 3. CBR has several subsidiaries, through which it develops the activities described in its corporate purposes. Among such subsidiaries, the Company had, as of December 31, 2006, 92.5% of the stock capital of Comercial Properties Investimentos Imobiliários Ltda. ( CCPII ). The remaining 7.5% of the capital stock are held by Cyrela Imobiliária Ltda., another of CBR s subsidiaries. 4. CPII, in its turn, holds, as of December 31, 2006: (i) direct stakes in investment funds that hold the Nova São Paulo, Verbo Divino, Brasilinvest, CENESP, Brasílio Machado, Faria Lima Financial Center, Corporate Park, JK Financial Center, Faria Lima Square office buildings, and ABC Plaza Shopping; (ii) direct stake in Shopping D; and (iii) other properties for income. 5. CCPII s assets described in item 4 above are related to the activities of (i) development for and acquisition of office buildings and shopping centers and (ii) management of those properties ( Commercial and Industrial Real Estate Development Activities ). Such activities have characteristics, target public and competitors that are different from those of other development activities for sale, and also have different profitability and margins. 6. The purpose of CBR s intended partial spin-off is the segregation of the net assets related to the quotas held by CBR at CPPII, and, consequently, of the assets related to Commercial and Industrial Real Estate Development Activities, and transference to a new publicly-held company to be incorporated, Cyrela Commercial Properties S.A. Empreendimentos e Participações ( CCP ). 7. The present proposal for partial spin-off is justified by the fact that it is a corporate and equity restructuring operation, which allows the Company to maintain its focus on activities related to development for sale, concentrating its operations on that market so as to become more efficient, maximizing its results. Likewise, CCP, a new company to be incorporated and that will absorb CCPII s quotas and its respective assets, will 2

3 be able to focus on Commercial and Industrial Real Estate Development Activities, becoming more efficient to compete with its peers in that market. 8. Such fact will not result in a change in CBR s corporate purpose, which will remain the same, and CBR will be able to carry out activities related to commercial and industrial real estate development. 9. Pursuant to Article 223, paragraph 3 of the Brazilian Corporation Law, since CBR is a publicly-held company, listed in the New Market segment of the São Paulo Stock Exchange BOVESPA ( New Market ), CCP will obtain the registration as publicly-held company, and the acceptance of its shares to be traded in the New Market, within the maximum period of one hundred and twenty (120) days as from the AGE that resolves on and approves the present proposal for partial spin-off. 10. CBR s Board of Executive Officers understands that the operation will not result in damages to its shareholders, once its corporate interests will be kept in identical equity proportions at CBR and CCP. In addition to that, as set forth in Chapter III below, CCP s common shares attributed to CBR s shareholders as a result of the partial Spin-Off will be entitled to the same rights and advantages attributed to shares issued by CBR and provided for in the project for CCP s Bylaws, attached herewith (Exhibit I). 11. By virtue of the reasons described above, and in view of the other conditions provided for herein, the Company s managers understand that the partial spin-off, as set forth herein, represents the best alternative to conduct CBR s activities, once it creates more favorable conditions to preserving and adding value to its shareholders. CHAPTER II APPRAISAL CRITERION OF THE PORTION OF SHAREHOLDER S EQUITY DIRECTED TO THE NEW COMPANY, OPERATION REFERENCE DATE, TREATMENT OF THE SUBSEQUENT EQUITY VARIATIONS AND DECREASE OF CBR S CAPITAL 12. CBR s partial spin-off will take place through the segregation and transference of the net assets related to the quotas held by CBR at CPPII and, consequently, of the assets 3

4 related to Commercial and Industrial Real Estate Development Activities to a new publicly-held company to be incorporated, CCP. 13. The value of CBR s net assets to be transferred to CCP was determined through an appraisal held on March 14, 2007 by Terco Grant Thornton Auditores Independentes SS, headquartered in the city of São Paulo, state of São Paulo, at Avenida das Nações Unidas, nº , bloco II, 20º andar, Corporate Taxpayer s ID (CNPJ/MF) / , duly registered at the Regional Accounting Council of the State of São Paulo under #2 SP /O-8, represented by its partner, Mr. José André Viola Ferreira, Brazilian, married, accountant, Individual Taxpayer s Register (CPF/MF) , duly registered at the Regional Accounting Council of the State of São Paulo under #1 SP /O-0, Identity Card (RG) , issued by the Public Security Office of the State of São Paulo on ( Terco ), attached herewith (Exhibit II), and followed the accounting appraisal criterion of the net assets book value, based on the elements comprising CBR s balance sheet, as of December 31, 2006, reference date of the partial spin-off ( Reference Date ), audited by Terco (Exhibit III). 14. On the Reference Date, CBR s shareholders equity was of one billion, nine hundred forty-eight million, five hundred fifty thousand, two hundred twenty-six reais and two centavos (R$1,948,550,226.02). According to the aforementioned appraisal, CBR s total net assets to be spun off and transferred to CCP corresponds to two hundred twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais and thirty-seven centavos (R$228,222,951.37), representing % of CBR s total shareholders equity. Such portion will still be composed of assets, as described in Item 12 above, which will be contributed in the subscription and payment of CCP s capital stock, pursuant to Articles 7 and 8 of the Brazilian Corporation Law, with the resulting issue of CCP s shares in favor of CBR s shareholders, who will become CCP s shareholders. 15. The equity variations occurred between the Reference Date and the effective approval of the partial spin-off by CBR s AGE will be appropriated by CBR or by CCP, depending on whether they concern the assets, rights and obligations maintained at the Company, or those related to the portion of CBR s equity to be spun off and transferred to CCP, respectively. 4

5 16. CCP will act on the development, purchase and sale of completed or underconstruction commercial and industrial real estate (including hybrids), of lands and notional fractions, and/or the stake in real estate assets, in the leasing and management of real estate, in real estate construction, and in the rendering of consultancy services in matters related to the real estate market. 17. CBR s net assets to be transferred will be conveyed to CCP s equity, with the consequent assumption by the latter of the liabilities resulting from the transferred assets. The new company thus becomes responsible only for the obligations related to the assets, rights and liabilities transferred to it, with no joint liability with the Company, pursuant to Article 233, sole paragraph, of the Brazilian Corporation Law. 18. By virtue of the reasons described herein, any creditor of the Company will be able to oppose to the conditions set forth, regarding their credit, provided that they notify the Company within ninety (90) days as from the date of publication of the partial spin-off acts, pursuant to Article 233, sole paragraph, of the Brazilian Corporation Law. 19. In view of the partial spin-off, CBR s capital stock will be reduced by two hundred twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais and thirty-seven centavos (R$228,222,951.37), standing at one billion, three hundred fifty-three million, three hundred four thousand, nine hundred seventy-eight reais and sixty-three centavos (R$1,353,304,978.63), pursuant to the provisions in items 29 and 30 below, and the Company s Bylaws must undergo the related amendment, pursuant to the provisions in the attachment herewith (Exhibit IV). 20. After the analysis of the available options, CBR s Management chose to hire the specialized company Terco, whose experts proceeded to: (i) appraise the portion of CBR s equity purpose of the spin-off by book value, based on the elements comprising the balance sheet audited by CBR, calculated on the Reference Date; and (ii) elaborate the respective accounting appraisal report. The hiring of Terco and the validity of the report that reflects the appraisal of the portion of CBR s equity described herein will be ratified in CBR s AGE, and thus depend on the analysis and approval of CBR s shareholders, pursuant to Law no. 6,404/76. 5

6 CHAPTER III NUMBER AND TYPE OF SHARES TO BE ATTRIBUTED TO CBR S SHAREHOLDERS DUE TO THE PARTIAL SPIN-OFF AND RIGHTS OF SHARES 21. CCP, like CBR, will have its capital stock composed only of common shares. 22. The number of shares issued by CCP to be attributed to current CBR s shareholders will observe the appraisal criterion determined by the book value of shareholders equity. Upon approval of the partial spin-off and incorporation of CCP, each CBR shareholder will receive one CCP share for each share held in CBR, pursuant to Article 229, paragraph 5 of the Brazilian Corporation Law. 23. CCP s common shares, attributed to CBR shareholders due to the partial spin-off of CBR s equity, will be entitled to the same rights and advantages attributed to shares issued by CBR and provided for in the project for the Bylaws, attached herewith (Exhibit I). There will not be an alteration or extinguishment of the rights of shares to be issued by CCP in relation to shares issued by CBR. CCP will have the same Depositary Receipts Programs as CBR as of the date of approval of the Partial Spin- Off. CHAPTER IV ASSETS AND LIABILITIES TO BE TRANSFERRED TO THE NEW COMPANY 24. CBR s partial spin-off will occur upon transference of CCP s assets and liabilities, pursuant to the provisions in Exhibit V herewith, which will form the portion of shareholders equity conveyed to CCP, which will then be incorporated. 25. The adjustments and transference of assets, rights and obligations resulting from the partial spin-off will be set forth, if this is the case, in appropriate instruments to be timely formalized between the Company and CCP. 6

7 CHAPTER V CBR S CAPITAL STOCK BREAKDOWN AFTER THE PARTIAL SPIN-OFF 26. As a result of CBR s partial spin-off, its capital stock will be reduced by two hundred twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais and thirty-seven centavos (R$228,222,951.37), representing the amount of spun off net assets, standing at one billion, three hundred fifty-three million, three hundred four thousand, nine hundred seventy-eight reais and sixty-three centavos (R$1,353,304,978.63), fully paid, divided into three hundred fifty-four million, four hundred sixty-four thousand, eight hundred seventy-eight (354,464,878) common, registered, book-entry shares, with no par value, therefore without extinction of shares. 27. Thus, its capital stock breakdown after the partial spin-off remains unaltered, as follows: Shareholder Amount of Common Shares % Eirenor Sociedad Anonima 21,900, Elie Horn 118,609, EH Capital Management 7,502, Janus Capital Management - USA 22,070, Rogério Jonas Zylberzstajn 7,286, Managers 1,229, Treasury 6,000 0 Other 175,860, Total 354,464, CHAPTER VI BREAKDOWN OF THE NEW COMPANY S CAPITAL STOCK AFTER THE PARTIAL SPIN-OFF 28. CCP s capital stock, to be subscribed and paid with CBR s spun off net assets, will be two hundred twenty-eight million, two hundred twenty-two thousand, nine hundred fifty-one reais and thirty-seven centavos (R$228,222,951.37), divided into three 7

8 hundred fifty-four million, four hundred sixty-four thousand, eight hundred seventyeight (354,464,878) common, registered, book-entry, shares, with no par value, and will be distributed among its shareholders in identical proportion to CBR s capital stock, as follows: Shareholder Amount of Common Shares % Eirenor Sociedad Anonima 21,900, Elie Horn 118,609, EH Capital Management 7,502, Janus Capital Management - USA 22,070, Rogério Jonas Zylberzstajn 7,286, Managers 1,229, Treasury 6,000 0 Other 175,860, Total 354,464, CHAPTER VII AMENDMENT TO THE CBR S BYLAWS AND PROJECT FOR CCP S BYLAWS 29. In view of the reduction in CBR s capital stock due to the partial spin-off, the amendment to CBR s Bylaws, pursuant to the terms of the minutes attached herewith (Exhibit IV), will be submitted to CBR s AGE, which will resolve on the partial spin-off, without any damage or loss, of any nature, to any of its shareholders, or right of refund of the shares held by those who disagree with the proposal. 30. The project for CCP s Bylaws pursuant to the terms of the minutes attached herewith (Exhibit I), as well as CCP s listing in the New Market, will be submitted to the appreciation of CBR s AGE, which will approve the partial spin-off and the consequent incorporation of CCP, which will also authorize CCP s managers, elected in the said meeting, to execute the respective Novo Mercado Membership Agreement with the São Paulo Stock Exchange BOVESPA. 8

9 CHAPTER VIII GENERAL PROVISIONS 31. CCP will be incorporated at the moment of approval of the partial spin-off by the AGE, when its managers will be appointed. 32. Once CBR s partial spin-off and the conferring of the spun off portion to CCP s capital stock are accomplished, with the consequent incorporation of CCP, it will be incumbent upon CCP s management, as well as CBR s management, to practice all acts deemed necessary for its implementation, as well as to carry out the filing of all acts concerning the partial spin-off. 33. The cost to be incurred with the implementation of the partial spin-off process is estimated at five hundred thousand reais (R$500,000.00), including expenses related to the fees of auditors, appraisers, attorneys and publications. São Paulo, March 14, Elie Horn Chief Executive Officer Luis Largman Investor Relations Officer 9

10 Exhibit I Project for the Bylaws of CCP(to be incorporated with the partial spin-off) 10

11 Exhibit II Report of Appraisal of the Portion of CBR s Shareholders Equity to be Spun off 11

12 Exhibit III CBR s Financial Statements on the Reference Date Consolidated Balance Sheet BR GAAP R$ 000 December 31, 2006 December 31, 2005 ASSETS Current Asset 2,159, ,684 Cash and Cash Equivalents 57,524 35,403 Financial Investments 357,244 60,052 Available for Sale Marketable Securities 2,462 3,067 Accounts Receivable 566, ,229 Marketable Real Estates 976, ,914 Current Accounts with Partners in Projects 23,132 35,370 Recoverable Income Tax and Contributions 12,170 12,318 Selling Expenses to be recognized 101,972 48,462 Other Receivables 62,168 29,869 Long-term Assets 671, ,573 Accounts Receivable 298, ,991 Financial Investments 143, ,522 Accounts receivable from expropriation 15,739 19,389 Related Parties 117,846 19,207 Recoverable Income Taxes and Contributions 20,280 8,740 Deferred Income Tax and Social Contribution 32,399 37,080 Advances for Real Estate Acquisition 40,212 40,387 Other Receivables 2,241 10,257 Permanent Assets 212, ,932 Investment in Controlled Companies 67,859 1,814 Fixed Assets 143, ,107 Deferred Total Assets 3,042,486 1,775,189 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities 643, ,100 Loans and Financing 57,236 95,126 Payable Taxes and Contributions 43,884 29,570 Provision for Estimated Costs 50,144 25,262 Real Estate Aquisition Payable 250,119 77,017 Dividends payable 30,183 27,185 Related Parties 23,416 10,267 Current Accounts with Partners in Projects 21,537 21,125 Clients' Advance Payments 83,988 82,615 Other Payables 83,036 34,933 Long-term Liabilities 350, ,772 Loans and Financing 67, ,708 Real Estate Aquisition Payable 100,439 12,726 Results of Real Estate Sales to be recognized 17,980 25,489 Provisions for Contingencies 26,768 42,384 Deferred Income Tax and Social Contribution 97,174 81,738 Other Payables 40,237 3,727 Minority interest 100,302 78,534 SHAREHOLDERS' EQUITY 1,948,550 1,018,783 Capital Stock 1,581, ,045 Profit Reserve 367, ,749 Treasury Shares (11) (11) Total Liabilities and Shareholders Equity 3,042,486 1,775,189 12

13 Exhibit IV Minutes of CBR s Bylaws as Amended after the Partial Spin-Off 13

14 Exhibit V Assets and Liabilities to be Transferred to CCP Assets Current assets..r$10,635, Investments in subsidiaries..r$136,657, Investments in real estate investment funds R$66,508, Goodwill to be amortized.r$14,422, Sub-Total...R$228,224, Liabilities Current Liabilities..R$1, Sub-Total.. R$1, Total R$228,222, SP v1 14