MERGER PROJECT BY INCORPORATION PARTICIPATING COMPANIES. ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. - PDF

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MERGER PROJECT BY INCORPORATION PARTICIPATING COMPANIES ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. Public Company ( Merging Company ) AND OPTIMUS SGPS, S.A. ( Merged Company )

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MERGER PROJECT BY INCORPORATION PARTICIPATING COMPANIES ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. Public Company ( Merging Company ) AND OPTIMUS SGPS, S.A. ( Merged Company ) INDEX INTRODUCTION MERGER PROJECT: Chapter I Identification of the Participating Companies; Chapter II Type of Merger; Chapter III - Merger Motives, Conditions and Objectives; Chapter IV Shareholding Relationships between the Participating Companies; Chapter V Balance Sheets of the Participating Companies; Chapter VI Shares to be awarded to the Shareholders of the Merged Company and Exchange Ratio; Chapter VII Project of Amendments to the Articles of Association of the Merging Company; Chapter VIII Protective Measures of the Rights of Third-Parties that are not Shareholders; Chapter IX Protection Mechanisms of Creditors Rights; Chapter X Date as of which the Operations of the Merged Company are considered, for Accounting Purposes, as executed on behalf of the Merging Company; Chapter XI Rights assured by the Merging Company to the Shareholders of the Merged Company entitled to special rights; Chapter XII Special Benefits awarded to Experts, Members of the Management or Audit Bodies of the Participating Companies; Chapter XIII Form for the Delivery of Shares in the Merging Company to the Shareholders of the Merged Company and Date as of those Shares entitle the respective Shareholders to share in Profits and any Specifications regarding such Right; Chapter XIV Adopted Evaluation Criteria. SCHEDULES: Schedule I Applications submitted before the Chartered Accountants Association and respective Appointment; Schedule II Balance Sheets of the Participating Companies, both referring to 31 December 2012, pursuant to and for the purposes of Article 98(2) of the Portuguese Companies Code; Schedule III List of Stakes held by OPTIMUS and transferred by Merger; Schedule IV Project of Articles of Association to be adopted by the Merging Company. INTRODUCTION 1. ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A., Public Company, with registered offices at Rua Actor António Silva, no. 9, Campo Grande, parish of Lumiar, municipality of Lisbon, taxpayer number , registered before the Companies Registrar of Lisbon under the same number, with the registered share capital of EUR 3,090, (three million, ninety thousand, nine hundred and sixty-eight Euros and twenty-eight cents), hereinafter referred to as ZON or the Merging Company ; and 2. OPTIMUS SGPS, S.A., joint stock company, with registered offices at Via Norte-Espido, parish of Maia, municipality of Maia, taxpayer number , registered before the Companies/Real Estate Registrar of Maia under the same number, with the registered share capital of EUR 115,000, (one hundred and fifteen million Euros), hereinafter referred to as OPTIMUS or the Merged Company ; Both jointly referred to as the Participating Companies. Are intending to proceed with the merger of both companies through the global transfer of the assets of OPTIMUS to ZON and the granting of shares representing the registered share capital of ZON to the shareholders of OPTIMUS, pursuant to and for the purposes of Article 97 and following provisions of the Portuguese Companies Code (hereinafter referred to as the PCC ). As far as the Boards of Directors of the Participating Companies understand, the envisaged merger is grounded on economic rationality reasons, which are detailed in this Merger Project prepared pursuant to Article 98 of the PCC. For such purposes, the Board of Directors of the Participating Companies prepared this Merger Project and the respective Schedules. Lisbon, 21 January 2013 By and on behalf of ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A. The Board of Directors, Daniel Proença de Carvalho Rodrigo Jorge de Araújo Costa José Pedro Pereira da Costa Luís Miguel Gonçalves Lopes Duarte Maria de Almeida e Vasconcelos Calheiros Fernando Fortuny Martorell António Domingues László Hubay Cebrian Vítor Fernando da Conceição Gonçalves Paulo Cardoso Correia Mota Pinto Nuno João Francisco Soares de Oliveira Silvério Marques Joaquim Francisco Alves Ferreira de Oliveira Mário Filipe Moreira Leite da Silva Isabel José dos Santos Miguel Filipe Veiga Martins Catarina Eufémia Amorim da Luz Tavira André Palmeiro Ribeiro By and on behalf of OPTIMUS SGPS, S.A. The Board of Directors, Ângelo Gabriel Ribeirinho dos Santos Paupério Miguel Nuno Santos Almeida Maria Cláudia Teixeira de Azevedo António Bernardo Aranha da Gama Lobo Xavier Ana Paula Garrido Pina Marques David Pedro de Oliveira Parente Ferreira Alves Manuel António Neto Portugal Ramalho Eanes José Manuel Pinto Correia Paulo Joaquim Santos Plácido MERGER PROJECT I IDENTIFICATION OF THE PARTICIPATING COMPANIES (Article 98 (1)(b) of the PCC) 1. Merging Company ZON MULTIMÉDIA SERVIÇOS DE TELECOMUNICAÇÕES E MULTIMÉDIA, SGPS, S.A., Public Company, with registered offices at Rua Actor António Silva, no. 9, Campo Grande, parish of Lumiar, municipality of Lisbon, taxpayer number , registered before the Companies Registrar of Lisbon under the same number, with the registered share capital of EUR 3.090, (three million, ninety thousand, nine hundred and sixtyeight Euros and twenty-eight cents); and 2. Merged Company OPTIMUS SGPS, S.A., joint stock company, with registered offices at Via Norte-Espido, parish of Maia, municipality of Maia, taxpayer number , registered before the Companies/Real Estate Registrar of Maia under the same number, with the registered share capital of EUR 115,000, (one hundred and fifteen million Euros). II MERGER TYPE (Article 98 (1)(a) of the PCC) The envisaged merger will take the form of a global transfer of assets of the Merged Company to the Merging Company, under the terms of Article 97(4)(a) of the PCC. The merger will then be made through the incorporation of OPTIMUS into ZON. Subsequently, all assets and liabilities held by OPTIMUS on the merger completion date, including the rights and obligations arising from its activity, will be globally transferred to ZON. The merger will be made in accordance with the accounting principles applicable in Portugal and pursuant to the legal rules generally applicable to merger operations. The Merger Project will be subject to the opinion of the Audit Boards of the Participating Companies, as well as to the examination to be made by an independent Chartered Accountant, pursuant to Article 99 (1)(2)(4) and (5) of the PCC. For such purposes, the Board of Directors of the Participating Companies decided to promote the examination of this Merger Project by the same independent Chartered Accountant to be appointed by the Chartered Accountants Association, as allowed under Article 99 (3) of the PCC, and have already submitted the relevant applications before such Association, as well as received letters from the same confirming the requested appointment (Schedule I). III MERGER MOTIVES, CONDITIONS AND OBJECTIVES (Article 98 (1)(a) of the PCC) 1. Motives A. Brief Overview of the Participating Companies Activities The Participating Companies have as corporate scope of activities the management of investments in other companies as an indirect exercise of economic activity, and hold shares in companies and consequently participate in businesses integrated in the telecommunications and multimedia market in Portugal and, as regards ZON, also in Angola and Mozambique (hereinafter referred to as ZON Group and OPTIMUS Group ). ZON Group operates mainly in the national communications market with businesses in the following areas: television, broadband and voice communications, advertising and distribution of pay-tv channels, cinema exhibition and distribution, video distribution and television rights. In ZON Group emphasis shall be made to the company ZON TV Cabo Portugal, S.A. 100% owned by ZON which acts as operator of fixed communications network and as provider of mobile communication services, owning and operating a next-generation network ( NGN ) with an extensive coverage over the national territory (including mainland and islands territories). This operator offers a wide range of communications services, including but not limited to retail commercial offers of voice, data and television services to residential and business customers in Portugal. Additionally, ZON Group also holds stakes in companies that provide pay-tv services and that are operating in Angola and Mozambique using the trademark ZAP with high commercial success. Finally, ZON Group further holds stakes in the registered share capital of Dreamia Serviços de Televisão, S.A. and of Sport TV Portugal, S.A., which are engaged in the production of channels and media contents in the entertainment and sports areas. OPTIMUS Group, on the other hand, operates in communications national market in the areas of voice communications, broadband and pay-tv services. This Group holds the entire registered share capital of the operator OPTIMUS COMUNICAÇÕES, S.A., which operates a nextgeneration mobile communications network GSM/UMTS/LTE, with broad coverage over the national territory, as well as a fixed communications new generation network that includes a transmission and backbone component and other local access component in fibre. This operator offers to residential and business customers a wide range of mobile and fixed communications services, including retail commercial offers of voice and data, further providing wholesale services to other operators. B. Overview of the Merger s Motives The Participating Companies believe in the great potential and added value that the envisaged merger will bring to the Portuguese market, since it will result, inter alia, in (i) the creation of a telecommunications group with a significant size and capacity to increment the projection of the Portuguese capital market; (ii) the potential growth originated by the complementarity and convergence of the infrastructures of both Participating Companies, with the consequent development of innovative and more wide-ranging products and services; (iii) the promotion of the competition, productivity and innovation, through the creation of an operator with a remarkable size and present in all market segments in Portugal; (iv) the creation of a more solid and stronger operator, as a result of a larger scale operation, with the obtaining of operational synergies; and (v) the possibility of increasing the potential international exposure and growth. The aforesaid creation of a stronger and more solid communication group will allow a greater ability to pursue a sustainable growth, internationalization and efficient management strategy, where the sharing of experience and expertise of the respective teams will be a decisive and essential factor. The Merger will also lead to the creation of a group able to invest and to promote its own competitiveness as well as of the sector s competition, alongside the creation of value and new opportunities for shareholders, employees, customers and suppliers. A group that will bring benefits to the society in general, as well as to the defense of national economic interests. In particular, the projected merger is justified on the following grounds: (i) Creation of a telecommunications group with remarkable dimension and capacity to increase the projection of the Portuguese capital market A group with a remarkable dimension and with a much larger scale will result from the envisaged merger considering a combined income amounting approximately to EUR 1,610,000, (one thousand, six hundred and ten million Euros) and an operational profit (EBITDA) of approximately EUR 543,000, (five hundred, forty-three thousand million Euros). Moreover, the merger will also enable the group resulting therefrom to achieve a market share corresponding approximately to 26% of the income of the domestic telecommunications market 1. Additionally, the group resulting from the merger will achieve a stock-market capitalization in the national and international capital markets, which will improve the ability to attract investment and an increased liquidity, as well as increase the international projection of the Portuguese capital market. This increased scale will be decisive for the reinforcement of the investment in the communications sector in Portugal, for the strengthening of the affirmation of the group, as well as of the Portuguese companies in general within the international markets. It will also be a solid basis for exploring new opportunities to create value for customers, which will be able to take benefit from a greater dynamic, more innovation and certainly more competitive prices, through the larger presence of the relevant brands in the market, the increased commercial activity and the development of more innovative and wide-ranging products and services. The combination of the businesses of ZON and OPTIMUS will determine the increase of the competitive capacity, generating more competition in the communications market, which it is deemed to be dynamic, innovative and generator of social welfare, with clear benefits for consumers and for the Country. 1 Proforma values referring to FY2011. (ii) Consolidation of a nationwide network: potential growth originated by the complementarity and convergence of infrastructures The envisaged merger will maximize the technological use of the existing infrastructures and information systems, exploring the convergence and leveraging technological innovation. The merger will then result in an indispensable key factor for the competitiveness of the group before its current and future residential and business customers, as well as in a driver for the development of the Information Society in Portugal. In fact, the connection of the network infrastructures of the both Groups will generate a fixed and mobile telecommunications network with high-speed performance and future-oriented solutions, with a wide coverage over the Portuguese territory and its population, enabling a stronger and more sustainable competition. This will be a decisive factor for the development of a relevant set of innovative products and services offers in Portugal, notably for: (i) the development of joined quadruple play offers for residential and business markets; and (ii) a set of offers more flexible and adaptable, either from a technical and from a price perspective, to the demands of the consumers and companies operating in Portugal. The same factor will also be crucial for the reduction of the dependence of the infrastructures and services provided by direct competitors. The abovementioned benefits arising from the merger will also create an opportunity for those suppliers that are prepared to meet the coming investment challenges that may be required for the exploitation of the convergence and integration, as well as of the innovation and dynamism that the new operator intends to bring to the market. (iii) Competition, productivity and innovation improvement, through the creation of an operator with dimension and remarkable presence in all market segments in Portugal ZON Group and OPTIMUS Group have complementary businesses in Portugal, as the respective operations belong to different market segments. Therefore, the integration between a mobile operator and a next-generation fixed network will generate several opportunities. In particular, such integration will allow the availability of products and services in all relevant segments of the telecommunications market in Portugal, as well as the creation and launch of new offers, whether or not integrated, of fixed voice, mobile voice, television and fixed and mobile broadband, with new features and more competitive prices. The added value to the customer will also correspond to an improvement of the services provided, which will certainly be considered a successful factor resulting from the integration of both Groups. These facts will imply also a significant increase of the competition in the national communications market and the new group will assume the role of promoter and facilitator of the improved competition in the different market segments, with clear benefits for the consumers and for the Country. This increased competing capacity will also have a particular impact in the provision of telecommunication services to business customers, as the operator that will result from this integration will perform certainly a decisive role in the development of solutions and products that will contribute for the increment of productivity and reduction of the costs of the Portuguese companies. This aspect is of the most importance considering the present context of an increasing integration of the competitors services offers. (iv) Creation of a more solid and stronger telecommunications group In the last years, domestic market has not being grown and the sector has undergone enormous pressure on revenues results. The economic and financial environments, in Portugal and abroad, also trigger more difficulties for the access of all national companies to the capital markets and respective costs. The national recession context has triggered also a reduction of the domestic consume that leads to the pressure on the return of the investments that may be required to be made in a sector characterized by strong economies of scale and scope. In order to meet the challenges raised by the current context, the Participating Companies have been pursuing efficiency solutions with undeniable success and have been seeking proper conditions to provide a more attractive global offer to their customers and thus reducing pressure on revenues. However, it seems undeniable that, despite not being strictly indispensable for the future of the Participating Companies, the increase of the efficiency and profitability, as well as the obtaining of synergies resulting from the merger that are enhanced by the increase of the scale, assume an important and unique role as it will enable the group resulting from the merger to be more solid and sustainable and better prepared to meet the future challenges. Summing-up the above, the following synergies resulting from the merger shall be highlighted: Optimization of investment on infrastructures; Integrated management and planning of fixed and mobile network, with the exploitation of network convergence; Decrease of the dependence on infrastructures belonging to competing operators; Reduction of the costs inherent to the investment of ZON Group in the mobile sector and of OPTIMUS Group in the fixed communications sector and in the pay-tv project, with the reciprocal gains as regards the core business of each group; Optimization of the strategy for the approach to the market segments in which each company individually has more experience; Optimization resulting from the joint negotiation of contracts and purchase orders; and Offers of integrated and converging products and solutions. The Board of Directors of the Participating Companies estimate that the created value shall range between EUR 350,000, (three hundred and fifty million Euros) and EUR 400,000, (four hundred million Euros) for the identified synergies. The synergies estimated value results from the future discounted value of the gains arising of the merger. Further to the synergies identified above, it should also be considered the force that arises from the integration of both teams and their wide experience in the sector, and the opportunity resulting from the exploitation of a broader customer base and a set of qualified and wide-ranging infrastructures, whose potential value is not considered in the figures above. (v) Increase of the international exposure and growth A remarkable effect of the projected merger will come from the creation of conditions for a significant improvement of the internationalization commitment. The scale obtained in Portugal, as
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