Business Context and Reporting Period
This Form 6-K filing by Banco Bradesco S.A. (Bank Bradesco) covers the month of May 2003. The document details a proposal by the Board of Directors, approved on May 22, 2003, for the absorption of Banco Bilbao Vizcaya Argentaria Brasil S.A. (BBV Banco) by Bradesco. The transaction is scheduled to be submitted to a Special Stockholders' Meeting on June 9, 2003, with the objective of increasing competitiveness, productivity, and synergies through the conversion of BBV Banco into a wholly-owned subsidiary.
Key Financial Metrics and Transaction Values
The filing focuses on the financial mechanics of the proposed merger rather than standard quarterly operating results. Key values include:
- Acquisition Cost: Bradesco will acquire 4,631,991,278 BBV Banco stocks held by BBVA for R$1,849,970,549.00.
- Book Value of Equity (as of March 31, 2003): BBV Banco is valued at R$2,584,692,686.24; Bradesco is valued at R$11,707,743,139.86.
- Capital Increase: Bradesco will increase its capital by R$630,000,000.00 through the issuance of 70,431,409,114 new stocks to BBV Banco shareholders.
- Post-Merger Capital: Bradesco's total capital will be R$6,930,000,000.00, divided into 1,585,879,423,300 stocks.
- Stock Substitution Ratio: For each BBV Banco stock, shareholders will receive 44.422475667 Bradesco stocks (split between common and preferred).
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes and Transaction Structure
The primary material change is the proposed structural absorption of BBV Banco. Key characteristics include:
- Ownership Transfer: BBV Banco will become a wholly-owned subsidiary of Bradesco. BBVA will retain a seat on Bradesco's Board of Directors via a Stockholders' Agreement.
- Valuation Basis: The exchange ratio was determined using a mix of economic value (agreed upon by parties) and book value. The R$630 million attributed to transferred BBV Banco stocks equates to R$0.397 per stock, while the new Bradesco stocks issued are valued at R$8.94 per thousand stocks based on December 2002 market prices.
- Stock Rights: New preferred stocks issued will carry a 10% dividend premium over common stocks and priority in capital redemption but no voting rights.
- Withdrawal Rights: Shareholders of both entities retain the right to withdraw from the companies based on specific book value calculations per thousand stocks.
Guidance, Risks, and Contingencies
The filing includes standard forward-looking statements regarding future economic circumstances and industry conditions. Specific risks and contingencies identified include:
- Regulatory Approval: The operation is contingent upon approval by the Brazilian Central Bank.
- Shareholder Approval: The transaction requires ratification by Bradesco stockholders at the June 9, 2003 meeting.
- Market and Economic Risks: Management notes that actual results may differ from expectations due to general economic conditions, industry trends, and operating factors.
- Unusual Items: Fractional shares resulting from the capital increase will be sold on the São Paulo Stock Exchange, with proceeds credited to the Capital Reserve account rather than distributed directly to shareholders.
Investor Verification Checklist
- Confirm the final approval status of the transaction by the Brazilian Central Bank and the Bradesco Special Stockholders' Meeting.
- Verify the final exchange ratio and the exact number of new Bradesco shares issued to BBV Banco shareholders.
- Review the audited financial statements of BBV Banco as of March 31, 2003, to validate the book value used in the exchange calculation.
- Monitor the impact of the R$630 million capital increase on Bradesco's earnings per share and dividend payout ratios.
- Assess the integration plan for BBV Banco's operations and the specific terms of the Board seat granted to BBVA.