In an award delivered on 14 August, a tribunal chaired by France’s Yves Derains upheld claims brought by Safra’s holding company Morzan against Companhia Brasileira de Distribuição (CBD) and its controlling shareholder Wilkes Participações for breach of pre-emptive rights under a share purchase agreement.
The dispute relates to a 2009 deal in which CBD, the French-owned retailer behind the Pão de Açúcar network of supermarkets in Brazil, agreed to buy Ponto Frio, one of the country’s leading consumer electronics and home-appliance chains, which Safra’s late husband Alfredo Monteverde established in the 1940s.
The deal, valued at US$420 million, saw Morzan – which Safra co-owns with her son Carlos Monteverde – sell CBD its interest in Globex, the company that owns Ponto Frio. As part of the deal, Morzan was offered pre-emptive rights to purchase newly issued CBD shares in exchange for the ones it held in Globex.
Morzan filed for ICC arbitration in 2012, alleging that CBD and its controlling shareholder Wilkes Participações had breached the share purchase agreement by failing to assign Morzan all the preemptive rights it was owed and by allowing affiliated companies to participate in the capital increase, thereby reducing the number of shares available to Morzan. Safra reportedly claimed in a letter to CBD’s chairman that she received less than 70 per cent of the shares she was entitled to.
According to Brazilian newspaper Valor Econômico, the tribunal concluded that CBD had breached the agreement by assigning subscription rights for some 950,000 preferred shares to minority shareholders in Globex, which should have been assigned to Morzan. The paper says the tribunal also upheld claims that CBD breached the agreement by allowing other member companies of France’s Groupe Casino and Brazil’s Diniz Group, CBD’s ultimate owners, to acquire shares in the deal.
In a regulatory disclosure last week, CBD said the tribunal ruled that CBD and Wilkes should jointly and severally pay just over 212 million reais (US$59 million), adjusted in accordance with Brazil’s National Consumer Price Index, plus interest of 12 per cent as of April 2012 until effective payment. GAR understands that the total value of the award exceeds US$100 million.
The arbitration was seated in Paris, with hearings conducted in English and Portuguese. Morzan appointed Brazilian arbitrator José Carlos de Magalhães, while Colombian-French arbitrator Eduardo Silva Romero, partner at Dechert in Paris, was nominated by CBD.
Morzan was represented by US litigation boutique Williams & Connolly and Levy & Salomão Advogados in São Paulo.
CBD relied on Souza Cescon Barrieu & Flesch, the same firm that advised it on the Ponto Frio transaction.
Wilkes meanwhile used Shearman & Sterling in Paris, with the team including partner Emmanuel Gaillard, and Brazilian firm Andrade & Fichtner Advogados. Shearman transactional lawyers were also involved in the 2009 deal.
A former Morzan subsidiary, Via Varejo, was also named as a respondent in the arbitration. It took counsel from LO Baptista Schmidt Valois Miranda Ferreira Agel.
Safra, who was born in Brazil and is based in Monaco, is ranked by Forbes among the world’s wealthiest individuals. She acquired her wealth through a series of marriages, which have been marked by tragedy. Her second husband, Monteverde, died in 1969 from gunshot wounds in an apparent suicide. Her fourth husband, Lebanese billionaire banker Edmund Safra, was killed in 2000 in a fire in Monte Carlo that was caused by arson. She continues to chair a philanthropic foundation he founded, which has reportedly donated more than US$250 million to various scientific, cultural and humanitarian causes.
Morzan Empreendimentos e Participações Ltda v Companhia Brasileira de Distribuição, Wilkes Participações and Via Varejo
• Yves Derains (France) (Chair)
• José Carlos de Magalhães (Brazil) (appointed by Morzan)
• Eduardo Silva Romero (Colombia) (appointed by CBD)
Counsel to Morzan
• Williams & Connolly LLP
Partners John Buckley Jr and CJ Mahoney in Washington, DC
• Levy & Salomão Advogados
Partners Angela Di Franco and Angelo Caldeira Ribeiro (no longer with firm) in São Paulo
Counsel to Companhia Brasileira de Distribuição
• Souza Cescon Barrieu & Flesch
Partners Carlos David Albuquerque Braga and Gabriel Seijo Leal de Figueiredo in São Paulo
Counsel to Wilkes Participações
• Shearman & Sterling LLP
Partners Emmanuel Gaillard and Coralie Darrigade in Paris
• Andrade & Fichtner Advogados
Partners José Antonio Fichtner and Sergio Mannheimer in São Paulo
Counsel to Via Varejo
• LO Baptista Schmidt Valois Miranda Ferreira Agel
Partners Mauricio Almedia Prado and Adriana Braghetta in São Paulo.
