UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14D-9
(Amendment No. 1)
Solicitation/Recommendation Statement
under Section 14(d)(4) of the Securities Exchange Act of 1934
NET SERVIÇOS DE COMUNICAÇÃO S.A.
(Name of Subject Company)
NET SERVIÇOS DE COMUNICAÇÃO S.A.
(Name of Person Filing Statement)
Preferred
Shares, no par value, and
American Depositary Shares, each representing one Preferred Share
(Title of Class of Securities)
N/A (Preferred Shares)
64109T201 (American Depositary Shares)
(CUSIP Number of Class of Securities)
José Antonio Guaraldi Felix
Investor Relations Officer
Rua Verbo Divino, 1356
São Paulo-SP-04719-002
Brazil
Telephone:
(55)-11-2111-2785
with copies to:
Nicolas Grabar, Esq.
Neil Whoriskey, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New
York, NY 10006
Telephone: (212)-225-2000
(Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications
on Behalf of the Person Filing Statement)
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
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This Amendment No. 1 (Amendment No. 1) amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on October 17, 2013 (as amended or supplemented, the Schedule 14D-9) by Net Serviços de Comunicação S.A.
(Net). The Schedule 14D-9 relates to the offer (the Offer) by Empresa Brasileira de Telecomunicações S.A.Embratel (Embratel) and Embratel Participações S.A.
(Embrapar and together with Embratel, the Offerors) to purchase any and all outstanding common shares, no par value (Common Shares), and outstanding preferred shares, no par value (Preferred Shares),
including Preferred Shares represented by American Depositary Shares (ADSs), of Net, other than those held by the Offerors or their affiliates, in cash at a price of 29.02 Brazilian
reais
(R$) per Common Share and per
Preferred Share, in each case plus interest at the benchmark interest rate of the Interbank Deposit Certificate,
Certificado de Depósito Interbancário
(the CDI Rate), calculated
pro rata
from August 19,
2013 through the Auction Date, net of the applicable stock exchange and settlement fee, any applicable brokerage fees or commissions and applicable withholding taxes, upon the terms and subject to the conditions set forth in the offer to purchase,
dated October 17, 2013, and the related ADS letter of transmittal.
The information in the Schedule 14D-9 is incorporated in this
Amendment No. 1 by reference to all of the applicable items in the Schedule 14D-9, except that such information is hereby amended and supplemented to the extent specifically provided in this Amendment No. 1. Capitalized terms used in this
Amendment No. 1 without definition shall have the meanings specified in the Schedule 14D-9.
Item 4. The
Solicitation/Recommendation.
Item 4. The Solicitation/Recommendation is hereby amended as follows:
The following new sentences are inserted after the second sentence of the second bullet entitled Market Price and Premium on page 7 of the Schedule
14D-9 in the section entitled Recommendation of the Board:
The board noted that the weighted average price of the
Preferred Shares rose from R$21.60 for February 2012 to a level just below the base offer price upon announcement of the base offer price. Accordingly, as the market price reflected the outstanding Offer, the board decided to focus its analysis on
comparing the base offer price to the historical market prices and net asset value of the Companys Common Shares and Preferred Shares (including Preferred Shares represented by ADSs) unaffected by the announcement of the Offer and the offer
price. The board noted that the trading prices of the Companys Common Shares and Preferred Shares fluctuated during the long period between announcement and launch of the Offer, including a peak weighted average price per Preferred Share in
the second quarter of 2013 that was higher than the base offer price plus accrued interest before falling back below it. The information set forth in the Offer to Purchase under the caption The Tender Offer7. Certain Information about
the Common Shares, Preferred Shares and ADSs is incorporated by reference herein.
The following new sentences are inserted prior to the last
sentence of the first bullet entitled Credit Suisse Opinion on page 8 of the Schedule 14D-9 in the section entitled Recommendation of the Board:
Nets board noted that the offer price of R$29.02 per Common Share and per Preferred Share was within the implied Net equity value
per share reference ranges for three of the four financial analyses provided to Nets board in connection with Credit Suisses opinion, including the discounted cash flow analysis and the selected companies analysis based on 2013 EBIT and
2014 EBIT. However, the offer price was below the implied per share reference range of R$35.74 to R$39.30 in the selected precedent transactions analysis. Nets board considered that analysis less relevant than the other three analyses because
the Offer differs in important ways from the 21 selected transactions reviewed in the Credit Suisse analysis, including in particular the fact that the Offer (i) is a mandatory offer, whereas none of the 21 selected transactions were mandatory
offers and (ii) is targeting the less than 10% of outstanding Net shares that the Offerors do not already own, whereas over 50% of the outstanding equity was acquired by the offerors in all but five of the selected transactions.
2
The last paragraph on page 12 of the Schedule 14D-9 in the section entitled Opinion of Banco de
Investimentos Credit Suisse (Brasil) S.A. is hereby amended and restated in its entirety to read as follows:
In connection
with Credit Suisses opinion to Nets board of directors, Credit Suisse provided Nets board of directors with various financial analyses as described below. The analyses considered Net as a standalone operation and therefore did not
include benefits or operating, tax or other losses, including any premiums, synergies, incremental value and/or costs, if any, that may be realized upon consummation, or otherwise as a result of, the Offer or any other transaction. The preparation
of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. Credit Suisse arrived at its ultimate opinion based on the results of all analyses undertaken and factors considered by it and assessed as a whole and did not draw, in isolation,
conclusions from or with regard to any one factor or method of analysis. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented
in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.
The last sentence of the last paragraph on page 16 of the Schedule 14D-9 in the section entitled Certain Company Projections is deleted in its
entirety.
The first sentence prior to the paragraph entitled Operational Projections on page 17 of the Schedule 14D-9 in the section entitled
Certain Company Projections is hereby amended and restated in its entirety to read as follows:
The Company Projections
and the main assumptions underlying them are:
Assumptions Concerning Macroeconomic Conditions
. In preparing the Company
Projections, Nets management made certain assumptions related to macroeconomic conditions. Managements estimates were based on publicly available data, including information from the Central Bank of Brazil, as well as the judgments and
internal evaluations of Net. Net considered various macroeconomic factors in developing the following operational and financial projections, including (i) gross domestic product (GDP); (ii) the Brazilian long term interest rate
(
Taxa de Juros de Longo Prazo
) (TJLP); (iii) inflation in Brazil, as measured by both the general index of market prices (
Índice Geral de Preços Mercado
) (IGP-M) and the
consumer price index, as calculated by the Brazilian Institute of Geography and Statistics (
Instituto Brasileiro de Geografia e Estatística
) (IPC-A); (iv) the base interest rate in Brazil, known as the SELIC rate;
(v) the U.S. dollar/
real
exchange rate; and (vi) inflation in the United States, as measured by the U.S. Department of Labor consumer price index (CPI).
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Macroeconomic
Metrics
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2013
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2014
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2015
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2016
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2017
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2018
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2019
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2020
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2021
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2022
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GDP
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4.10
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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4.00
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%
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TJLP
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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5.00
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%
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IPC-A
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5.60
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%
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5.54
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%
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5.42
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%
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5.24
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%
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5.11
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%
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4.98
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%
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4.98
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%
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4.98
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%
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4.98
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%
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4.98
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%
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IGP-M
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4.78
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%
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5.79
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%
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4.71
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%
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4.58
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%
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4.58
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%
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4.58
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%
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4.58
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%
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4.58
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%
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4.58
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%
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4.58
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%
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SELIC
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9.50
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%
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9.50
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%
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9.50
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%
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9.00
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%
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8.00
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%
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7.50
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%
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7.50
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%
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7.50
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7.50
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%
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7.50
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Exchange Rate (BRL/USD)
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2.25
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2.30
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2.37
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2.44
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2.51
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2.58
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2.65
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2.72
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2.80
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2.87
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CPI
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1.71
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%
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2.43
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%
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2.30
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%
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2.20
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%
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2.20
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%
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2.20
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%
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2.20
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%
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2.20
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%
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2.20
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%
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2.20
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%
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Source:
Central Bank of Brazil: Relatório Focus; LCA Consultores, August 2013
3
The following new paragraph is inserted following the paragraph entitled Operational Projections and
prior to the graphic entitled Network Coverage on page 17 of the Schedule 14D-9 in the section entitled Certain Company Projections:
The key assumptions underlying the operational projections prepared by Nets management, which are subject to the limitations
discussed above, are as follows:
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Population Growth: 1% per year.
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Urban Homes with Television: increase from 32% in 2012 to 63% in 2022.
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Urban Homes with Internet: increase from 34% in 2012 to 68% in 2022.
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Net Market Share for TV Services: increase from 35% in 2012 to 41% in 2022.
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Net Market Share for Internet Services: increase from 28% in 2012 to 47% in 2022.
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Net Market Share for Fixed Telephony: 11% in 2012 to 31% in 2022.
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The second sentence of the second
paragraph and prior to the graphic entitled Homes Passed on page 17 of the Schedule 14D-9 in the section entitled Certain Company Projections is hereby amended and restated in its entirety to read as follows:
The projected network coverage increase is from 85,000 kilometers in 2013 to 135,200 kilometers in 2022.
The following new paragraph is inserted following the paragraph entitled Financial Projections and prior to the graphic entitled
Revenues on page 18 of the Schedule 14D-9 in the section entitled Certain Company Projections:
The key
assumptions underlying the financial projections prepared by Nets management, which are subject to the limitations discussed above, are as follows:
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Marginal Income Tax Rate: 34% per year.
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Interest Income: based on the applicable CDI Rate.
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Amortization: useful life of approximately 3 years for intangible assets.
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Depreciation: average rate of 9% per year for existing assets and 10% per year for new assets.
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Variable and Fixed Costs: to increase annually in line with the IGP-M.
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4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and
correct.
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NET SERVIÇOS DE COMUNICAÇÃO S.A.
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By:
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/s/ Roberto Catalão Cardoso
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Name: Roberto Catalão Cardoso
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Title: Chief Financial Officer
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Dated: October 30, 2013
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