FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of January, 2021
Brazilian Distribution Company
(Translation of Registrant’s Name Into English)
Av. Brigadeiro Luiz Antonio,
3142 São Paulo, SP 01402-901
Brazil
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F)
Form 20-F X Form 40-F
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101 (b) (1)):
Yes ___ No X
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101 (b) (7)):
Yes ___ No X
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes ___ No X
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Publicly-Held Company of Authorized Capital
CNPJ nº 47.508.411/0001- 56
NIRE No.: 35.300.089.901
MINUTES OF THE EXTRAORDINARY GENERAL MEETING
HELD ON DECEMBER 31, 2020
1. Date, Time and Venue: On December 31, 2020, at 10:00 a.m., held exclusively digitally and remotely by videoconference, pursuant to the Brazilian Securities and Exchange Commission Instruction No. 481, of December 17, 2009.
2. Call Notice and Attendance: Call notice published in the Official Gazette of the State of São Paulo, in the issues of days December 15, 16 and 17, 2020, on pages 18, 14 and 16, respectively, and in the newspaper Folha de S. Paulo in the issues of days December 15, 16 and 17, 2020, on pages A18, A20 and A21, respectively, that shall be filed on the head office of the Company.
3. Attendance: Meeting convened with the presence of shareholders representing one hundred and seventy-two million, six hundred and eighty-nine thousand, two hundred and one (172,689,201) ordinary shares, representing, approximately, 64,41% of the total voting shares of the Company, according to the signatures contained in the Shareholders Attendance Book, as well as Mr. Christophe José Hidalgo, Interim CEO, Finance and Invertors Relations VP.
4. Board: Chairman: Christophe José Hidalgo; Secretary: Marcelo Acerbi de Almeida.
5. Agenda: To resolve on the following matters:
5.1. Sendas Partial Spin-Off with Merger of Sendas’ Spun Off by the Company: In relation to the partial spin-off of Sendas Distribuidora S.A., a corporation enrolled with the CNPJ/ME under No. 06.057.223/0001-71 (“Sendas”), com reverse spun-off to the Company (“Sendas’ Spin-Off”), comprised by (a) equity interest equivalent to approximately 90.93% (ninety point ninety-three percent) of the total shares of Almacenes Éxito S.A., a corporation organized and existent under the law of Colômbia, with headquarters in Envigado, Departamento de Antioquia, Colombia, enrolled with
Free translation |
the CNPJ/ME under No. 23.041.875/0001-37 (“Éxito”), held by Sendas, corresponding to 393,010,656 (three hundred and ninety-three million, ten thousand, six hundred and fifty-six) shares, and equivalent to approximately 87.80% (eighty-seven point eighty percent) of all shares issued by Éxito (“Éxito Interest”); and (b) assets related to 6 (six) gas stations held by the Company (“Operating Assets”, being the Operating Assets, together with the Éxito Interest, hereinafter jointly referred to as “Sendas’ Spun Off”): (i) the ratification of the appointment and hiring of appraisal firm for the appraisal of Sendas’ Spun Off, namely, Magalhães Andrade S/S Auditores Independentes, registered with the Regional Accounting Council of the State of São Paulo under nº 2SP000233/O-3 and CNPJ/ME nº 62.657.242/0001-00, with registered office in the city of São Paulo, State of São Paulo, at Av. Brigadeiro Faria Lima, nº 1.893, 6th floor, Jardim Paulistano, CEP 01451-001 (“Appraisal Firm”); (ii) the approval of the appraisal report of Sendas’ Spun Off prepared by the Appraisal Firm (“Sendas’ Appraisal Report”), contained in Exhibit 5.1.(ii); (iii) the ratification of the entering into of the “Protocol and Justification of Sendas’ Partial Spin-Off with the Merger of the Spun off by the Company (“Sendas’ Protocol”), contained in Exhibit 5.1.(iii); (iv) the Sendas’ Spin-Off, with the merger of Sendas’ Spun Off by the Company, and other procedures described in the Sendas’ Protocol, pursuant to Sendas’ Protocol; e (v) the authorization of members of the Company’s management to perform any and all acts that may be necessary, useful and/or proper to the merger of Sendas’ Spin-Off, as well as other procedures described in the Sendas’ Protocol, under the terms of the Sendas’ Protocol;
5.2. Company’s Partial Spin-Off: In relation to the partial spin-off of Company, with the spun off reverse to Sendas itself (“CBD’s Spin-Off”), comprised by the total shares representing the capital stock of Sendas held by the Company, corresponding to 100% (one hundred percent) of the common, nominative shares with no par value issued by Sendas (“Spun Off CBD”): (i) the ratification of the appointment and hiring of the Appraisal Firm responsible for the appraisal of the CBD’Spun off; (ii) the approval of the CDB’ Spun Off appraisal report, as prepared by the Appraisal Firm (“CBD’ Appraisal Report”), contained in Exhibit 5.2.(ii); (iii) the ratification of the entering into of the “Protocol and Justification of the Partial Spin-Off of Companhia Brasileira de Distribuição with the Merger of the Spun off by Sendas” (“CBD’s Protocol”), contained in Exhibit 5.2.(iii); (iv) CBD’s Spin-Off and other procedures described in the CBD’s Protocol; and (v) the authorization of the members of the Company’s management to perform any and all acts that may be necessary, useful and/or proper to the merger of CBD’s Spin-Off;
Free translation |
5.3. To approve the amendment to Article 4 of the Company’s By-Laws as a result of the capital reduction resulting from CBD's Spin-Off, under the terms and conditions provided for in the CBD Protocol, if approved, as well as to reflect the capital increase approved at the meeting of the Company's Board of Directors held on October 28, 2020 and registered with the São Paulo Board of Trade in session held on December 01, 2020, under no. 516.276/20-7; and
5.4. To approve the Company’s By-Laws restatement, so as to incorporate the amendments above mentioned.
6. Resolutions: Being the guidelines and voting declarations filed at the Company's head office and initialed by the Chairman and Secretary, duly registered, the Shareholders unanimously waived the reading of the Call Notice and approved the drawing up of these minutes in the form of a summary of the facts that occurred and that its publication is made with the omission of the signatures of the shareholders present, as permitted by article 130, paragraph 1, of Law 6,404/76 (“Corporation Law”).
6.1. Regarding Sendas' Spin-Off: (i) by a majority of votes, being counted 172.286.439 in favor, 402.449 abstentions and 313 contrary votes, to ratify the appointment and hiring of the Appraisal Firm responsible for the appraisal of Sendas’ Spun Off; (ii) by a majority of votes, being counted 169.884.374 in favor, 2.804.114 abstentions and 713 contrary votes, to approve the Sendas’ Appraisal Report related to Sendas’ Spun Off, comprised by the Éxito Interest and the Operating Assets, pursuant to Exhibit 5.1.(ii); (iii) by a majority of votes, being counted 172.668.795 in favor, 19.543 abstentions and 863 contrary votes,, to ratify the entering into of the Sendas’ Protocol, pursuant to Exhibit 5.1.(iii); (iv) by a majority of votes, , being counted 172.668.549 in favor, 19.523 abstentions and 1.129 contrary votes, to approve, pursuant to the Sendas’ Protocol, Sendas’ Spin-Off with the merger of Sendas’ Spun Off by the Company, as well as other procedures described in the Sendas’ Protocol. Whereas Sendas is a whole-owned subsidiary of the Company, and that its assets is partially spun-off, with the merger of Sendas’ Spun Off by the Company, Sendas’ Spin-Off shall not result in a capital increase or issuance of new shares by the Company, remaining the capital stock of the Company, totally subscribed and paid in, at 6.865.829.549,07 (six billion, eight hundred and sixty-five million, eight hundred and twenty-nine thousand, five hundred and forty-nine Reais and seven cents), divided into 268.351.567 (two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven) common, registered, book entry shares with no par value; and (v) by a majority of votes,
Free translation |
being counted 172.667.464 in favor, 20.527 abstentions and 1.210 contrary votes, to authorize the members of the Company’s management to perform any and all acts that may be necessary, useful and/or proper to implement Sendas’ Spin-Off, as well as other procedures described in the Sendas’ Protocol, under the terms of the Sendas’ Protocol;
6.2. Regarding the CBD's Spin-Off: (i) by more than a half of the voting shares, being counted 172.285.897 in favor, 402.567 abstentions and 737 contrary votes, to ratify the appointment and hiring of the Appraisal Firm responsible for the appraisal of CBD’ Spun Off; (ii) by more than a half of the voting shares, being counted 169.884.431 in favor, 2.804.061 abstentions and 709 contrary votes, to approve the CBD Appraisal Report, comprising exclusively by the equity interest held by the Company in Sendas, after Sendas’ Spin-Off, pursuant to Exhibit 5.2.(ii); (iii) by more than a half of the voting shares, being counted 172.668.970 in favor, 19.495 abstentions and 736 contrary votes, to ratify the entering into of the CBD Protocol, pursuant to Exhibit 5.2.(iii); (iv) by more than a half of the voting shares, being counted 172.668.970 in favor, 19.495 abstentions and 736 contrary votes, to approve, under the terms of the CBD Protocol, CBD’s Spin-Off with the merger of CBD’ Spun Off by Sendas, as well as other procedures described in the CBD Protocol; and (v) by more than a half of the voting shares, being counted 172.668.428 in favor, 19.647 abstentions and 1.126 contrary votes, to authorize the members of the Company’s management to perform any and all acts that may be necessary, useful and/or proper to implement CBD’s Spin-Off;
Under the terms of the CBD’s Protocol, the 268,351,567 (two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven) common, registered shares with no par value, issued by Sendas and held by the Company shall be delivered directly to the Company shareholders in proportion to their respective interests in the Company’s capital stock. This distribution shall occur after Sendas has obtained the listing of the shares issued by it in Novo Mercado segment of B3 S.A. - Brasil, Bolsa, Balcão (“B3”), and the listing of ADSs representing shares of the Company in the New York Stock Exchange (“NYSE”), on a date to be subsequently informed in a Notice to the Shareholders of the Company and Sendas.
As a result of CBD’s Spin-Off, the Company’s subscribed and paid-up capital stock will be reduced by R$ 1.215.962.963,38 (one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents), going from R$ 6.865.829.549,07 (six billion, eight hundred and sixty-five
Free translation |
million, eight hundred and twenty-nine thousand, five hundred and forty-nine reais and seven cents) to R$ 5.649.866.585,69 (five billion, six hundred and forty-nine million, eight hundred and sixty-six thousand, five hundred and eighty-five reais and sixty-nine cents), keeping the same number of common, registered shares with no par value issued by it, remaining the new capital stock divided into 268,351,567 (two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven) common, registered shares with no par value.
6.3. Due to the reduction of the Company's capital resulting from CBD's Spin-Off, as well as to reflect the capital increase approved at the meeting of the Company's Board of Directors held on October 28, 2020, to approve, by a majority of votes, being counted 172.668.265 in favor, 20.104 abstentions and 832 contrary votes, the amendment to Article 4 of the Company's By-Laws, which shall become effective with the following wording:
“ARTICLE 4 – The Company’s capital stock is of R$ 5.649.866.585,69 (five billion, six hundred and forty-nine million, eight hundred and sixty-six thousand, five hundred and eighty-five reais and sixty-nine cents), fully subscribed and paid in, divided into 268,351,567 (two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven) common, registered, book entry shares with no par value.”
6.4. As a result of the resolution approved above, by a majority of votes, being counted 172.668.871 in favor, 19.493 abstentions and 837 contrary votes, to restate the Company's By-Laws in order to incorporate the above amendments, which shall become effective pursuant to Exhibit 6.4.
7. Closing and Drawing up: Having no further matters, the work was suspended for the necessary time to draw up these minutes. The session was reopened, these minutes were read, found to be in compliance and signed electronically by all present.
8. Filed Documents: It is filed on the Company’s head office the publications of the Call Notice, the Management Proposal, Sendas’s Appraisal Report; Sendas’s Protocol, CBD’s Appraisal Report; CBD’s Protocol, the detailed final voting map, as well as the voting guidelines and protests received and authenticated by the Chairman and Secretary.
Free translation |
9. Signatures: Board: Chairman: Christophe José Hidalgo; Secretary: Marcelo Acerbi de Almeida. Attending Shareholders: (i) with attorney-in-fact Mayara Zolko: WILKES PARTICIPAÇÕES S.A. SEGISOR KING LLC HELICCO PARTICIPACOES LTDA. DANIELA SABBAG PAPA JORGE FAIÇAL FILHO FREDERICO AUGUSTO ALONSO RONALDO IABRUDI DOS SANTOS PEREIRA LUIZ HENRIQUE RODRIGUES COSTA ANTONIO SERGIO SALVADOR DOS SANTOS BELMIRO DE FIGUEIREDO GOMES RODRIGO ADURA ROBERTA BECHELLI SAMIR DE ARAÚJO JARROUJ ISABELA MARIA CADENASSI BATISTA SPX RAPTOR MASTER FUNDO DE INVESTIMENTO NO EXTERIOR MULTIMERCADO CRÉDITO PRIVADO SPX PATRIOT MASTER FIA SPX NIMITZ MASTER FUNDO DE INVESTIMENTO MULTIMERCADO SPX LANCER PREVIDENCIÁRIO FUNDO DE INVESTIMENTO MULTIMERCADO SPX FALCON MASTER FUNDO DE INVESTIMENTO DE AÇÕES SPX APACHE MASTER FUNDO DE INVESTIMENTO DE AÇÕES CANADIAN EAGLE PORTFOLIO LLC OCEANA INDIAN FUNDO DE INVESTIMENTO EM AÇÕES OCEANA B PREVIDÊNCIA FUNDO DE INVESTIMENTOS EM AÇÕES MÁSTER OCEANA LONG BIASED MASTER FUNDO DE INVESTIMENTO MULTIMERCADO OCEANA 03 MASTER FUNDO DE INVESTIMENTO MULTIMERCADO OCEANA LITORAL FUNDO DE INVESTIMENTO EM AÇÕES OCEANA LONG BIASED PREV FUNDO DE INVESTIMENTO MULTIMERCADO OCEANA LONG BIASED MASTER FUNDO DE INVESTIMENTO DE AÇÕES OCEANA VALOR MASTER FUNDO DE INVESTIMENTO DE AÇÕES OCEANA SELECTION MASTER FUNDO DE INVESTIMENTO DE AÇÕES OCEANA QP8 FUNDO DE INVESTIMENTO EM AÇÕES OCEANA VALOR II MASTER FUNDO DE INVESTIMENTO EM AÇÕES FUNDO DE INVESTIMENTO EM AÇÕES RVA EMB III OCEANA LONG BIASED B PREVIDENCIA FIFE FIM ÖLBERG FUNDO DE INVESTIMENTO MULTIMERCADO INVESTIMENTO NO EXTERIOR HSSP FUNDO DE INVESTIMENTO MULTIMERCADO INVESTIMENTO NO EXTERIOR VOKIN K2 LONG BIASED FUNDO DE INVESTIMENTO EM AÇÕES VOKIN PÃO DE AÇÚCAR FUNDO DE INVESTIMENTO MULTIMERCADO INVESTIMENTO NO EXTERIOR FDI 2 FUNDO DE INVESTIMENTO EM AÇÕES RBC – FUNDO DE INVESTIMENTO EM AÇÕES INVESTIMENTO NO EXTERIOR S4 FUNDO DE INVESTIMENTO MULTIMERCADO CRÉDITO PRIVADO INVESTIMENTO NO EXTERIOR VOKIN EVOLUTION FUNDO DE INVESTIMENTO MULTIMERCADO INVESTIMENTO NO EXTERIOR VOKIN ARARAT FUNDO DE INVESTIMENTO MULTIMERCADO MOSQUETEIROS FUNDO DE INVESTIMENTO EM AÇÕES FIA VOKIN ACONCAGUA MASTER
Free translation |
LONG ONLY ITAÚ NAVI LONG SHORT PREVIDÊNCIA FUNDO DE INVESTIMENTO MULTIMERCADO NAVI LONG BIASED MASTER FUNDO DE INVETIMENTO MULTIMERCADO NAVI LONG SHORT MASTER FUNDO DE INVESTIMENTO MULTIMERCADO NAVI LONG SHORT PREVIDÊNCIA FIFE FUNDO DE INVESTIMENTO MULTIMERCADO CRÉDITO PRIVADO NAVI LONG SHORT XP SEGUROS PREVIDÊNCIA FUNDO DE INVESTIMENTO MULTIMERCADO NAVI B PREVIDÊNCIA FUNDO DE INVESTIMENTO EM AÇÕES MÁSTER NAVI B PREVIDÊNCIA FIFE MASTER FUNDO DE INVESTIMENTO EM AÇÕES NAVI COMPASS MASTER FUNDO DE INVESTIMENTO EM AÇÕES NAVI CRUISE MASTER FUNDO DE INVESTIMENTO EM AÇÕES NAVI FENDER MASTER FUNDO DE INVESTIMENTO EM AÇÕES NAVI INSTITUCIONAL MASTER FUNDO DE INVESTIMENTO EM AÇÕES DUO HIX CAPITAL FUNDO DE INVESTIMENTO DE AÇÕES HIX AUSTRAL FUNDO DE INVESTIMENTO EM AÇÕES HIX CAPITAL MASTER FUNDO DE INVESTIMENTO EM AÇÕES HIX PREV 100 MASTER FUNDO DE INVESTIMENTO MULTIMERCADO HIX CAPITAL INSTITUCIONAL MASTER FUNDO DE INVESTIMENTO EM AÇÕES HIX CAPITAL EQUITIES LLC VELT MASTER PREV FUNDO DE INVESTIMENTO EM AÇÕES VELT MASTER FUNDO DE INVESTIMENTO EM AÇÕES VELT BV FUNDO DE INVESTIMENTO EM AÇÕES - INVESTIMENTO NO EXTERIOR VELT ALÍSIO FUNDO DE INVESTIMENTO EM AÇÕES VELT MASTER INSTITUCIONAL FUNDO DE INVESTIMENTO EM AÇÕES VELT PARTNERS FUND LLC FOURTH SAIL LONG SHORT LLC FOURTH SAIL DISCOVERY LLC "TAVOLA ABSOLUTO MASTER FUNDO DE INVESTIMENTO MULTIMERCADO" TAVOLA ABSOLUTO MASTER FIA TAVOLA LONG SHORT FIM HELIUS LUX LONG BIASED MASTER FUNDO DE INVESTIMENTO MULTIMERCADO; (ii) with attorney-in-fact Livia Beatriz Silva do Prado: STICHTING JURIDISCH EIGENAAR ACTIAM BELEGGINGSFONDSEN BEST INVESTMENT CORPORATION AGFIQ EMERGING MARKETS EQUITY ETF ARROWSTREET (CANADA) ACWI MINIMUM VOLATILITY ALPHA EXTENSION FUND I ARROWSTREET (CANADA) GLOBAL WORLD ALPHA EXTENSION FUND I ARROWSTREET ACWI ALPHA EXTENSION FUND III (CAYMAN) LIMITED ARROWSTREET ACWI ALPHA EXTENSION FUND V (CAYMAN) LIMITED ARROWSTREET CAPITAL GLOBAL EQUITY ALPHA EXTENSION FUND LIMITED ARROWSTREET CAPITAL GLOBAL EQUITY LONG/SHORT FUND LIMITED ARROWSTREET US GROUP TRUST ASCENSION ALPHA FUND, LLC BLACKWELL PARTNERS LLC SERIES A
Free translation |
BOSTON PARTNERS EMERGING MARKETS FUND BOSTON PARTNERS EMERGING MARKETS LONG/SHORT FUND BRITISH COLUMBIA INVESTMENT MANAGEMENT CORPORATION BRUNEI INVESTMENT AGENCY CALIFORNIA STATE TEACHERS RETIREMENT SYSTEM CANADA PENSION PLAN INVESTMENT BOARD CAUSEWAY EMERGING MARKETS FUND CAUSEWAY INTERNATIONAL OPPORTUNITIES FUND CHANG HWA COMMERCIAL BANK, LTD., IN ITS CAPACITY AS MASTER CUSTODIAN OF NOMURA BRAZIL FUND CITY OF NEW YORK GROUP TRUST COLLEGE RETIREMENT EQUITIES FUND COMMONWEALTH SUPERANNUATION CORPORATION CONSULTING GROUP CAPITAL MARKETS FUNDS - EMERGING MARKETS EQUITY FUND DESJARDINS EMERGING MARKETS MULTIFACTOR - CONTROLLED VOLATILITY ETF EATON VANCE MANAGEMENT FIDELITY RUTLAND SQUARE TRUST II: STRATEGIC ADVISERS EMERGING MARKETS FUND FIDELITY SALEM STREET TRUST: FIDELITY FLEX INTERNATIONAL INDEX FUND FIDELITY SALEM STREET TRUST: FIDELITY INTERNATIONAL SUSTAINABILITY INDEX FUND FIDELITY SALEM STREET TRUST: FIDELITY SERIES GLOBAL EX U.S. INDEX FUND FIRST TRUST LATIN AMERICA ALPHADEX FUND FRANKLIN TEMPLETON ETF TRUST - FRANKLIN FTSE BRAZIL ETF FRANKLIN TEMPLETON ETF TRUST - FRANKLIN FTSE LATIN AMERICA ETF FUTURE FUND BOARD OF GUARDIANS GAM MULTISTOCK GOVERNMENT EMPLOYEES SUPERANNUATION BOARD IBM 401(K) PLUS PLAN INVESCO PUREBETASM FTSE EMERGING MARKETS ETF INVESTERINGSFORENINGEN DANSKE INVEST INDEX GLOBAL AC RESTRICTED – ACCUMULATING KL ITAÚ FUNDS - LATIN AMERICA EQUITY FUND JANA EMERGING MARKETS SHARE TRUST JAPAN TRUSTEE SERVICES BANK, LTD. RE: RTB NIKKO BRAZIL EQUITY ACTIVE MOTHER FUND JAPAN TRUSTEE SERVICES BANK, LTD. RE: STB DAIWA EMERGING EQUITY FUNDAMENTAL INDEX MOTHER FUND JNL MULTI-MANAGER ALTERNATIVE FUND JOHN HANCOCK FUNDS II INTERNATIONAL STRATEGIC EQUITY ALLOCATION FUND JOHN HANCOCK FUNDS II STRATEGIC EQUITY ALLOCATION FUND JOHN HANCOCK VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY INDEX TRUST KAISER FOUNDATION HOSPITALS KAISER PERMANENTE GROUP TRUST LACM GLOBAL EQUITY FUND L.P. LEGAL & GENERAL FUTURE WORLD CLIMATE CHANGE EQUITY FACTORS INDEX FUND LEGAL & GENERAL GLOBAL EQUITY INDEX FUND LOS ANGELES COUNTY EMPLOYEES RETIREMENT
Free translation |
ASSOCIATION MANAGED PENSION FUNDS LIMITED MERCER QIF FUND PLC NATIONAL COUNCIL FOR SOCIAL SECURITY FUND NATWEST TRUSTEE AND DEPOSITARY SERVICES LIMITED AS TRUSTEE OF ST. JAMES'S PLACE STRATEGIC MANAGED UNIT TRUST NEW YORK STATE TEACHERS RETIREMENT SYSTEM NEW ZEALAND SUPERANNUATION FUND NORGES BANK NORTHERN TRUST INVESTMENT FUNDS PLC NORTHERN TRUST UCITS FGR FUND NTGI - QM COMMON DAILY ALL COUNTRY WORLD EX-US INVESTABLE MARKET INDEX FUND - LENDING NUVEEN EMERGING MARKETS EQUITY FUND OHIO POLICE AND FIRE PENSION FUND PARAMETRIC EMERGING MARKETS FUND PARAMETRIC TAX-MANAGED EMERGING MARKETS FUND SCHLUMBERGER INTERNATIONAL STAFF RETIREMENT FUND, FCP-SIF SCHWAB EMERGING MARKETS EQUITY ETF SCHWAB FUNDAMENTAL EMERGING MARKETS LARGE COMPANY INDEX ETF SCHWAB FUNDAMENTAL EMERGING MARKETS LARGE COMPANY INDEX FUND SPARTAN GROUP TRUST FOR EMPLOYEE BENEFIT PLANS: SPARTAN EMERGING MARKETS INDEX POOL SPDR MSCI EMERGING MARKETS FOSSIL FUEL FREE ETF SPDR MSCI EMERGING MARKETS STRATEGICFACTORS ETF SPDR S&P EMERGING MARKETS FUND SSGA MSCI ACWI EX-USA INDEX NON-LENDING DAILY TRUST SSGA SPDR ETFS EUROPE I PLC STANLIB FUNDS LIMITED STATE OF ALASKA RETIREMENT AND BENEFITS PLANS STATE OF NEW JERSEY COMMON PENSION FUND D STATE STREET EMERGING MARKETS EQUITY INDEX FUND STATE STREET GLOBAL ADVISORS LUXEMBOURG SICAV STATE STREET GLOBAL ADVISORS LUXEMBOURG SICAV - STATE STREET EMERGING MARKETS SRI ENHANCED EQUITY FUND STATE STREET GLOBAL ADVISORS LUXEMBOURG SICAV - STATE STREET ENHANCED EMERGING MARKETS EQUITY FUND STATE STREET GLOBAL ADVISORS LUXEMBOURG SICAV - STATE STREET GLOBAL EMERGING MARKETS INDEX EQUITY FUND STATE STREET GLOBAL ADVISORS TRUST COMPANY INVESTMENT FUNDS FOR TAX EXEMPT RETIREMENT PLANS STATE STREET GLOBAL ALL CAP EQUITY EX-U.S. INDEX PORTFOLIO STATE STREET IRELAND UNIT TRUST STATE STREET MSCI ACWI EX USA IMI SCREENED NON-LENDING COMMON TRUST FUND STATE STREET MSCI BRAZIL INDEX NON-LENDING COMMON TRUST FUND STICHTING PENSIOENFONDS ING SUNSUPER SUPERANNUATION FUND TEACHER RETIREMENT SYSTEM OF TEXAS THE BOARD OF THE PENSION PROTECTION FUND THE MASTER TRUST BANK OF JAPAN, LTD. AS
Free translation |
TRUSTEE OF NIKKO BRAZIL EQUITY MOTHER FUND THE NOMURA TRUST AND BANKING CO., LTD. RE: INTERNATIONAL EMERGING STOCK INDEX MSCI EMERGING NO HEDGE MOTHER FUND THE SEVENTH SWEDISH NATIONAL PENSION FUND- AP 7 EQUITY FUND THRIVENT CORE EMERGING MARKETS EQUITY FUND THRIVENT INTERNATIONAL ALLOCATION FUND THRIVENT INTERNATIONAL ALLOCATION PORTFOLIO TIAA-CREF FUNDS - TIAA-CREF EMERGING MARKETS EQUITY FUND TIAA-CREF FUNDS - TIAA-CREF EMERGING MARKETS EQUITY INDEX FUND TRUST & CUSTODY SERVICES BANK, LTD. RE: EMERGING EQUITY PASSIVE MOTHER FUND UTAH STATE RETIREMENT SYSTEMS VANGUARD FUNDS PUBLIC LIMITED COMPANY VANGUARD INVESTMENT SERIES PLC VANGUARD INVESTMENTS FUNDS ICVC-VANGUARD FTSE GLOBAL ALL CAP INDEX FUND VANGUARD TOTAL WORLD STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS VERDIPAPIRFONDET KLP AKSJE FREMVOKSENDE MARKEDER FLERFAKTOR VERDIPAPIRFONDET KLP AKSJE FREMVOKSENDE MARKEDER INDEKS I VICTORYSHARES EMERGING MARKET VOLATILITY WTD ETF WASHINGTON STATE INVESTMENT BOARD WELLS FARGO FACTOR ENHANCED EMERGING MARKETS PORTFOLIO WEST VIRGINIA INVESTMENT MANAGEMENT BOARD WISDOMTREE EMERGING MARKETS EX-STATE-OWNED ENTERPRISES FUND WM POOL - EQUITIES TRUST NO. 75 BRITISH COAL STAFF SUPERANNUATION SCHEME BUREAU OF LABOR FUNDS - LABOR RETIREMENT FUND BUREAU OF LABOR FUNDS-LABOR INSURANCE FUND BUREAU OF LABOR FUNDS-LABOR PENSION FUND COMMINGLED PENSION TRUST FUND EMERGING MARKETS RESEARCH ENHANCED EQUITY OF JPMORGAN CHASE BANK NA JNL/MELLON EMERGING MARKETS INDEX FUND JP MORGAN DIVERSIFIED FUND JPMORGAN EMERGING MARKETS RESEARCH ENHANCED EQUITY FUND JPMORGAN FUNDS MINEWORKERS`PENSION SCHEME NATIONAL PENSION INSURANCE FUND NEW SOUTH WALES TREASURY CORPORATION AS TRUSTEE FOR THE TCORPIM EMERGING MARKET SHARE FUND PUBLIC EMPLOYEES RETIREMENT SYSTEM OF OHIO SAS TRUSTEE CORPORATION POOLED FUND SBC MASTER PENSION TRUST SCRI - ROBECO QI CUSTOMIZED EMERGING MARKETS ENHANCED INDEX EQUITIES FUND SKAGEN KON-TIKI VERDIPAPIRFOND STICHTING DEPOSITARY APG EMERGING MARKETS EQUITY POOL THE MASTER TRUST BANK OF JAPAN, LTD. AS TRUSTEE FOR MTBJ400045828 THE MASTER TRUST BANK OF
Free translation |
JAPAN, LTD. AS TRUSTEE FOR MTBJ400045829 THE MASTER TRUST BANK OF JAPAN, LTD. AS TRUSTEE FOR MTBJ400045835 THE MASTER TRUST BANK OF JAPAN, LTD. AS TRUSTEE FOR MUTB400045792 THE MASTER TRUST BANK OF JAPAN, LTD. AS TRUSTEE FOR MUTB400045794 THE MASTER TRUST BANK OF JAPAN, LTD. AS TRUSTEE FOR MUTB400045795 VANGUARD EMERGING MARKETS SHARES INDEX FUND VANGUARD EMERGING MARKETS STOCK INDEX FUND VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND, A SERIES OF VANGUARD STAR FUNDS AMUNDI FUNDS AMUNDI INDEX SOLUTIONS GLOBAL MULTI-FACTOR EQUITY FUND MORGAN STANLEY INVESTMENT FUNDS GLOBAL BALANCED DEFESINVE FUND WITH CVM: 22918.000043.336912.1-6 MORGAN STANLEY INVESTMENT FUNDS GLOBAL BALANCED FUND WITH CVM: 22918.000043.336920.1-7 MORGAN STANLEY INVESTMENT FUNDS GLOBAL BALANCED INCOME FUND WITH CVM: 22918.000043.295779.1-5 J.P MORGAN CHASE BANK NA; (iii) with attorney-in-fact Karen Sanchez Guimarães: GWI ASSET MANAGEMENT S.A.; (iv) with attorney-in-fact Debora de Souza Morsch: CONTINENTAL FUNDO DE INVESTIMENTO EM AÇÕES HAYP FUNDO DE INVESTIMENTO EM AÇÕES; (v) CHRISTOPHE JOSÉ HIDALGO; and (vi) SERGIO FEIJÃO FILHO.
São Paulo, December 31, 2020
This is a true copy of the minutes drawn up in the proper book.
___________________________ Christophe José Hidalgo Chairman Signed electronically | ___________________________ Marcelo Acerbi de Almeida Secretary Signed electronically |
Free translation |
PROTEST
Shareholder CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
As the legal representative of the shareholder CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, the present protest is drawn up in view of the Company's non-acceptance of the power of attorney presented to the GSM held on this date, due to the alleged allegation of power of attorney unfit to participate, which does not match the document previously presented since the notary acknowledged the signatory of the power of attorney and it has fulfilled all legal procedures for regularization, as set out below by the Company.
“We clarify that some of the funds represented by us are non-resident investors, incorporated abroad and as already informed, their powers are verified in the act of notarization, I ask you to note that despite the lack of signature of one of the signatories, this power of attorney is duly certified responsible notary (Page 7), recognizing the validity of the instrument, even with the material error now pointed out.”
In these terms, we ask that said protest be authenticated and received by the board of the present Extraordinary General Meeting of Companhia Brasileira de Distribuição.
São Paulo, December 31,2020.
Free translation |
Exhibit 5.1(ii)
Sendas’ Appraisal Report
SENDAS DISTRIBUIDORA S.A. | ||
Appraisal report at book value on the net assets for purposes of spin-off with merger | ||
November 23, 2020 | 1 00 036/20 | |
Free translation |
Dear Shareholders of
SENDAS DISTRIBUIDORA S.A. and of
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
MAGALHÃES ANDRADE S/S AUDITORES INDEPENDENTES, audit and consulting firm, enrolled with the Regional Accounting Council of the State of São Paulo under number 2SP000233/O-3, registered with the National Registry of Legal Entities under number 62.657.242/0001-00 and located at Av. Brigadeiro Faria Lima, 1893 – 6th floor, Jardim Paulistano, São Paulo, Capital, appointed by you as expert to carry out the appraisal of the net assets at fair value of SENDAS DISTRIBUIDORA S.A., for purposes of partial spin-off with merger into the equity of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, fulfilled the diligences and verifications required for the performance of its work, presents this instrument.
APPRAISAL REPORT
which is subscribed.
São Paulo, November 23, 2020
MAGALHÃES ANDRADE S/S
Auditores Independentes
CRC2SP000233/O-3
GUY ALMEIDA ANDRADE
Accountant CRC1SP116758/O-6
Free translation |
INTRODUCTION
1. | The purpose of this spin-off and merger transaction is to separate certain assets of SENDAS DISTRIBUIDORA S.A. (SENDAS), which shall be merged into COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (CBD), in order to release the potential cash & carry business developed by SENDAS and the traditional retail business to be developed by CBD and its subsidiaries, for purposes of independent operation, with separate management and focused on the respective business models and market opportunities. In addition, by virtue of the Sendas’ Spin-off, each business shall have direct access to the capital market and other financing sources, to focus on the investment needs according to the profile of each company, creating, therefore, more value to the respective shareholders. |
2. | The spun-off company SENDAS is the wholly-owned subsidiary of the merging company CBD. |
3. | Therefore, the present Report, has the purpose of determining the book value of the net assets to be spun-off and merged, taking into account the financial position of SENDAS on September 30, 2020. |
4. | Accordingly, we analyzed the SENDAS’ balance sheet on the base appraisal date. |
MANAGEMENT’S RESPONSIBILITY FOR ACCOUNTING INFORMATION
5. | The SENDAS’ management is responsible for the bookkeeping of the accounting books and the preparation of the accounting information in accordance with the accounting practices adopted in Brazil and for the adjustments to market prices, as well as for the relevant internal controls deemed necessary for the preparation of such accounting information free and clear from relevant distortion, regardless if caused by fraud or error. The main accounting practices adopted by the Company and determined by management are described in EXHIBIT 2 of the Appraisal Report. |
COVERAGE OF WORK AND LIABILITY OF THE ACCOUNTANT
6. | Our responsibility is to express a conclusion on the value of the SENDAS’ partial net assets as at September 30, 2020, based on the work conducted in conformity with Technical Communication CTG 2002, approved by the Federal Accounting Council (CFC), which provides for the application of procedures in the analysis of the balance sheet for issuance of the Appraisal Report. Therefore, we have executed the appraisal of said SENDAS’ balance sheet in accordance to the Brazilian and the international audit regulations, which require the compliance of ethical requirements by the accountant, as well as ensure that the work is planned and the executed with the purposes of obtaining reasonable assurance that the shareholders’ equity calculated for the preparation of our appraisal report, is free from any material misstatement. |
7. | The issuance of the appraisal report involves the performance of selected procedures for purposes of verification of the amounts included in the Appraisal Report. The procedures selected depend on the |
Free translation |
accountant’s judgment, including the assessment of the risks of material misstatement of the shareholders’ equity, whether due to fraud or error. In the evaluation of risks, we consider the relevant internal controls for preparation and proper presentation of the SENDAS’ balance sheet to determine the most appropriate procedures under the circumstances, however without expressing an opinion on these internal controls. Our work also includes an evaluation of the adequacy of the accounting policies adopted and reasonability of the management’s accounting estimates. We believe that the evidence obtained is sufficient and appropriate to substantiate our conclusion.
SENDAS’ FINANCIAL POSITION
8. | The SENDAS’ financial position as at September 30, 2020, at book value, is reflected in the balance sheet, included in EXHIBIT 1, summarized as follows: |
ASSET | 25.577.683.997,96 |
(-) LIABILITY | 16.030.115.568,47 |
SHAREHOLDER’S EQUITY | 9.547.568.429,49 |
9. | SENDAS keeps its accounting regular, and its operations registered in own book and its balances duly composed and reconciled. |
10. | SENDAS’ accounting procedures are compliant with the accounting practices adopted in Brazil, based on the technical pronouncements issued by the Accounting Pronouncements Committee (CPC) and, therefore, the accounting balances recognize the value of the investments stated at the value of the investees’ equity. EXHIBIT 2 shows the main accounting practices adopted by the management in order to prepare SENDAS’ balance sheet. |
11. | The accounting procedures consider, for purposes of evaluation of the assets and liabilities, that the Company may continue as a going concern. Our evaluation also considered that the Company may continue as a going concern. |
EXTRA-ACCOUNTING ADJUSTMENTS TO REFLECT PRE-SPIN-OFF AGREEMENTS
12. | Before the spin-off, however after the base date of the equity evaluation, SENDAS and CBD agreed the exchange of assets, which shall be considered for purposes of this appraisal. |
13. | SENDAS holds four hundred and thirty-two million, two hundred and fifty-six thousand and six hundred and sixty-eight (432.256.668) common shares of Almacenes Èxito S.A. (Èxito), representing 96,57% of |
Free translation |
Èxito’s capital at the book value of R$ 10.073.960.080,58 (ten billion, seventy-three million, nine hundred and seventy thousand and eighty reais and fifty-eight cents). The book value of this asset, which was currently acquired, is consistent with its respective market price.
14. | Through exchange, SENDAS delivers to CBD 39.205.678 shares of Éxito’s capital stock, representing nine point zero seven nine four three percent (9.07943%) of that company’s capital stock at the fair value of R$914.658.145,29 (nine hundred and fourteen million, six hundred and fifty-eight thousand, one hundred and forty-five reais and twenty-nine cents). |
15. As a contra entry, SENDAS shall receive from CBD the following assets:
Assets | Book value | Fair value |
6.941.378.937 quotas of capital stock of Bellamar Empreendimento e Participações S.A. | 188.558.882,31 | 769.048.145,29 |
Land Feira de Santana | 13.286.435,20 | 15.070.000,00 |
Land Itaperi – Av. dos Expedicionários | 109.377,50 | 13.610.000,00 |
Land Ribeirão Preto – Av. Castelo Branco | 7.000.000,00 | 73.290.000,00 |
Land Americana – Rod. Luiz de Queiroz | 1.947.211,61 | 36.590.000,00 |
Land Campo Grande | 2.450.000,00 | 7.050.000,00 |
213.351.906,62 | 914.658.145,29 |
16. | The shareholding interest held by CBD in Bellamar, stated at book value and market price, is described in EXHIBIT 3, including the respective book value. |
17. | The land exchanged is described in EXHIBIT 4, which includes the Appraisal Reports at Market Value of each land. |
18. | The exchange is performed and demonstrated at fair value. |
19. | Before the spin-off, in addition to the Exchange, CBD agreed to contribute with two capital increases in SENDAS, in December, in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and eighty-seven reais and nine cents (R$684.679.887,09), in order to increase the shareholding interest value. The capital increases are broken down as follows: |
Free translation |
Current accounts asset balances between CBD and Sendas | 140.142.381,00 |
CBD’s properties delivered to SENDAS (Tancredo Neves and Santo Amaro) | 44.537.506,09 |
Cash capital contribution | 500.000.000,00 |
684.679.887,09 |
20. | The real estates received as capital payment are described in EXHIBIT 5. |
21. | In addition, SENDAS and CBD signed an agreement, whereby CBD will indemnify SENDAS in the event of materialization of the provisions for contingencies recorded in its activity liabilities that were transferred to CBD. As a result of this agreement, SENDAS provisioned an account receivable with CBD and the reversal of deferred tax on the liability provision, in the total amount of R$ 163.116.565,25. |
22. | The adjustments related to exchanges and capital increases are described in EXHIBIT 6. |
23. | The EXHIBIT 7 includes the balance sheet as at September 30, 2020, including the adjustments to the SENDAS’ financial position, after such adjustments, is broken down as follows: |
ASSET | 26.236.338.069,30 |
(-) LIABILITY | 15.840.973.187,47 |
SHAREHOLDER’S EQUITY | 10.395.364.881,83 |
24. | SENDAS’ capital stock is divided into three billion, two hundred and sixty-nine million, nine hundred and ninety-two thousand and thirty-four (3.269.992.034) registered common shares, with no par value. SENDAS is the wholly-owned subsidiary of CBD, which holds SENDAS’ total shares. At SENDAS’ shareholders’ meeting, held on October 5, 2020 and rectified on November 10, 2020, the SENDAS’ common shares were grouped and, currently, the capital stock is represented by two hundred and sixty-eight million, three hundred and fifty-one thousand and five hundred and sixty-seven (268.351.567) registered common shares, with no par value. |
SENDAS’ SPIN-OFF
25. | The net asset to be spun off is represented by the assets and liabilities from the transactions in connection with the gas stations, in the amount of twenty million, ninety-nine thousand, nine hundred and eighty-three reais and sixteen cents (R$ 20.099.983,16), and the total remaining shares issued by Éxito and owned by SENDAS, in the amount of nine billion, one hundred forty-nine million, three hundred and one thousand, nine hundred and thirty-five reais and twenty-five cents (R$ 9.159.301.935,29), totaling nine billion, one |
Free translation |
hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents (R$ 9.179.401.918,45), to be merged into CBD.
26. | The financial position, after the spin-off, is described in EXHIBIT 8, broken down as follows: |
ASSET | 17.050.287.019,40 |
(-) LIABILITY | 15.834.324.056,02 |
SHAREHOLDER’S EQUITY | 1.215.962.963,38 |
27. | By virtue of the spin-off, SENDAS’ capital stock remains unchanged, as well as the number of common shares representing SENDAS’ capital stock. |
CONCLUSION
28 | Based on the tests, analyses and inspections, the balance of SENDAS’ net asset, to be merged into CBD, amounts to at least R$ 9,179,401,918.45 (nine billion, one hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents). |
This appraisal report is issued in 7 (seven) copies and it contains 5 (five) sheets and 8 (eight) exhibits, printed in only one side and initialed by the expert who subscribes this report.
São Paulo, November 23, 2020
MAGALHÃES ANDRADE S/S Auditores Independentes CRC2SP000233/O-3 | GUY ALMEIDA ANDRADE Contador CRC1SP116758/O-6 |
Free translation |
SENDAS DISTRIBUIDORA S.A. |
EXHIBIT 1 |
Balance sheet on September 30, 2020 |
Free translation |
SENDAS DISTRIBUIDORA S.A. |
Balance sheet on September 30, 2020 |
Free translation |
EXHIBIT 2 |
SENDAS DISTRIBUIDORA S.A.
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
1. Basis of preparation
The individual financial statements have been prepared according to the Brazilian accounting practices, Law No. 6,404/76, particularly the technical pronouncements and interpretations issued by the Committee of Accounting Pronouncements - CPC, ratified by the Brazilian Securities Commission - CVM.
The financial statements have been prepared based on the historical cost, except for certain financial instruments measured at their fair values. All material information related to the financial statements, and only to them, is being evidenced and corresponds to that used by Management in its management of Sendas’s activities.
2. Foreign-currency transactions
Foreign-currency transactions are initially recognized at the market value of the corresponding currencies on the date in which the transaction qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated into Real, according to the quotation of the respective currencies at the closing of the fiscal years. Differences in the payment or translation of monetary items are recognized in the financial result.
3. Adjustment at present value of assets and liabilities
Long-term assets and liabilities are adjusted at their present value, taking into consideration the contractual cash flows and the respective interest rate, explicit or implicit. Short-term assets and liabilities are not adjusted at present value.
4. Classification of assets and liabilities as current and noncurrent
Assets (except for deferred income and social contribution taxes) with estimated realization or intended for sale or consumption within 12 months, as of the balance sheet dates, are classified as current assets. Liabilities (except for deferred income and social contribution taxes) with estimated settlement within 12 months, as of the balance sheet dates, are classified as current. All the other assets and liabilities (including deferred taxes) are classified as “noncurrent”. Deferred tax assets and liabilities are classified as “noncurrent”, net per legal entity, as set forth in the corresponding accounting pronouncement.
5. Conversion of subsidiaries and associates located in other countries
The financial statements are presented in reais, which is the functional currency. Every entity defines its functional currency and all of their financial transactions are measured in that currency. The financial statements of subsidiaries located in other countries that use a functional currency different from that of the parent company are translated into reais, on the balance sheet date, according to the following criterion:
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | Assets and liabilities, including goodwill and market value adjustments, are translated into reais at the exchange rate in effect on the balance sheet date. |
• | Statement of income and cash flow statement are translated into reais using the average rate, except if there are significant variations, in this case it is used the rate in effect on the date of the transaction. |
• | Shareholders’ equity accounts are maintained at the historical balance in reais and the variation is recorded under the caption of equity adjustments as other comprehensive results. |
The differences of exchange variations are recognized directly in a separate item of the shareholders’ equity. When a foreign operation is sold, the accumulated value of exchange variation adjustment in the shareholders’ equity is recorded in the result for the year.
The effects of the conversion of the investment into a foreign operation are recognized in separate items of the shareholders’ equity and reclassified to the result for the year upon write-off of the investment.
6. | Accounting for shareholding interest at cost derived from corporate restructurings and carried out with related parties |
Sendas accounts for interest derived from corporate restructurings acquired from related parties with no economic essence. The difference between the balance of cost and the value acquired is recorded in the shareholders’ equity, when the transaction is made between companies under common control. The transactions do not qualify as business combination.
7. Adoption of principal accounting judgments, estimates and assumptions
The preparation of the individual and consolidated financial statements of Sendas requires judgments and estimates and adoption of assumptions affecting the amounts of income, expenses, assets and liabilities and the evidence of contingent liabilities in the analysis of the financial statements, however, the uncertainties relating to these assumptions and estimates may produce results that require material adjustments at the book value of assets or liabilities in future years.
In the process of application of Sendas’s accounting policies, it was adopted judgments which had greater effect on values recognized in the individual financial statements regarding:
• Reduction at recoverable value - impairment;
• Inventories: Recognition of provisions for expected losses;
• Recoverable taxes: Expected realization of tax credits;
Fair value of derivatives and other financial Instruments: Measurement of the fair value of derivatives;
• | Provision for lawsuits: Recognition of provision for lawsuits representing expected probable losses estimated on reasonable basis; |
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• Income tax: Recognition of provisions based on reasonable estimates;
• | Stock-based payments: Estimate of the fair value of the operations based on evaluation model; |
• | Business combination: Estimates of the fair value of assets and liabilities acquired in the business combination and resulting goodwill; and |
• | Lease: Definition of the term of the lease agreement and incremental interest rate. |
8. Cash and Cash Equivalents
Comprise cash, bank accounts and short-term investments of high liquidity, immediately convertible into known values of cash and subject to immaterial risk of change of value, with intention and possibility of redemption in up to 90 days from the date of investment.
9. Accounts Receivable
The balances of accounts receivable are recorded initially at the transaction value, which corresponds to the sales value, and are subsequently measured according to the portfolio: (i) at fair value through other comprehensive results (VJORA), for receivables from credit card companies and (ii) at amortized cost, for the other portfolios.
For all the portfolios, estimated losses are taken into consideration and are recognized based on quantitative and qualitative analyses, history of actual losses in the past 24 months, credit rating and considering information on projections of assumptions related to macroeconomic events such as unemployment rate and consumer trust, as well as the volume of past-due credits from the accounts receivable portfolio. Sendas opted to measure provisions for accounts receivable losses for an amount equal to the credit loss expected for the entire life, applying the practical expedient of adopting a matrix of losses for each maturity range.
Provision for losses on financial assets measured at amortized cost is deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
In every date of presentation, Sendas evaluates if the financial assets recorded at amortized cost or VJORA have indications of loss on recoverable value. A financial asset has indication of loss on reduction to recoverable value when there is one or more event with adverse impact on the estimated future cash flows of the financial asset.
The accounts receivable are considered uncollectible and, therefore, written off from the accounts receivable portfolio when the payment is not made after 360 days from the maturity date.
At every annual closing of the balance sheets, Sendas evaluates if the assets or groups of financial assets presented loss on recoverable value.
10. Inventories
Accounted for at cost or net realizable value, whichever is lower. Inventories acquired are recorded at average cost, including storage and handling costs, to the extent they are required
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
to bring the inventories to their sale condition in the stores, less commercial agreements received from suppliers.
The net realizable value is the sale price in the normal course of business, less estimated costs to make the sale, such as: (i) taxes on sale; (ii) personnel expenses directly tied to sales; (iii) cost of goods; and (iv) other costs required to bring the goods to sale condition.
Inventories are reduced to their recoverable value through estimates of losses, breaks, scrapping, slow turnover of goods and estimate of loss for goods that will be sold with negative gross margin, which is periodically analyzed and evaluated for adequacy.
The commercial agreements received from suppliers are measured and recognized based on the contracts and agreements signed, and recorded in the result as the corresponding inventories are sold. They comprise agreements by purchase volume, logistic and specific deals for recovery of margin, reimbursement of expenses, among other, and are recorded as reduction of balances payable to the respective suppliers, when the Company contractually has the right to settle the liabilities with suppliers at the net values receivable under commercial agreements.
11. Recoverable Taxes
The Company records tax credits whenever it has legal, documental and factual opinion on these credits that allow their recognition, including estimate of realization, where the ICMS is recognized as reduction of “cost of goods sold” and the PIS and COFINS as reduction of result accounts on which the credits are calculated.
The realization of these taxes is made based on growth projections, operating issues and generation of debits for use of these credits by the companies of the Group.
12. Investments in controlled companies and associates
12.1. Interest in controlled companies, subsidiaries and associates
The determination of which subsidiaries are controlled by the Company and the procedures for full consolidation follow the concepts and principles established by CPC 36 (R3).
The financial statements of the subsidiaries are prepared on the same date of analysis of the financial statements of the Company, adopting consistent accounting policies.
In the individual financial statements, interest is calculated considering the percentage held by GPA or its subsidiaries.
In the individual financial statements, investments in controlled companies are accounted for under the equity method.
12.2. Accounting information of the associates
Investments in associates are accounted for under the equity method since it is an entity in which the Company exerts significant influence, but not the control, since (a) it is part of the shareholders’ agreement, appointing part of the management and having veto right in certain relevant decisions; and (b) power over operating and financial decisions. The associates are: (i) FIC managed by Itaú Unibanco S.A., (ii) Cnova N.V. which operates
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
mainly in the e-commerce in France; and (iii) Tuya, a finance investee of Éxito. There are no restrictions by the associates on transferring funds to the Company, for example as dividends.
13. Business combination and goodwill
Business combinations are accounted for under the acquisition method. The acquisition cost corresponds to the sum of the amount transferred, measured at fair value on the acquisition date, and the remaining amount of the noncontrolling shareholders’ interest in the acquired company. For every business combination, the buyer measures the noncontrolling shareholders’ interest in the acquired company at fair value or in proportion to the interest held in the identifiable net assets of the acquired company. The acquisition costs incurred are treated as expense and included in administrative expenses.
When the Company acquires a business, it evaluates the assets acquired and the financial liabilities assumed for the proper classification and designation according to the contractual terms, the economic circumstances and conditions on the acquisition date. This includes the separation of embedded derivatives in agreements by the acquired company.
Any contingent payment to be transferred by the buyer will be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent payment considered as asset or liability will be recognized through the result.
The goodwill is initially measured at cost, and the excess between the amount transferred and the amount recognized of noncontrolling shareholders’ interest on the assets acquired and liabilities assumed. If this payment is lower than the fair value of the net assets of the acquired subsidiary, the difference is recognized in the result as gain from advantageous purchase.
After the initial recognition, the goodwill is measured at cost, less non-recoverable losses. For purposes of test of loss on recoverable value, the goodwill acquired in a business combination is, since the acquisition date, allocated to each of the UGCs of the Company which should benefit from the business combination, regardless if other assets or liabilities of the acquired company are attributed to these UGCs.
Where the goodwill is part of an UGC and part of the operation within this unit is sold, the goodwill associated to the operation sold is included in the accounting value of the operation in the calculation of profit or loss on the sale of the operation. This goodwill is measured based on the values related to the operation sold and to the portion of the UGC that was maintained.
14. Properties for Investment
Properties for investment are measured at historical cost (including transaction costs), less accumulated depreciation and/or losses on non-recoverable losses, if any. The cost of properties for investment acquired in a business combination is calculated at fair value, pursuant to IFRS 3/ CPC 15 - Business Combination.
Properties for investment are written off when sold or when they are no longer permanently used and they are not expected to generate any future economic benefit from their sale. A property for investment is also transferred when there is intention to sell it and in this case it is classified as noncurrent assets held for sale. The difference between the net value from this sale and the book value of the asset is recognized in the statement of income for the year upon write-off.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
The properties for investment of the Company and its subsidiaries correspond to commercial areas and lots that are held for generation of income or future price appreciation.
The fair value of properties for investment is measured based on appraisals conducted by third parties.
15. Property, Plant and Equipment
The property, plant and equipment is stated at cost, net of accumulated depreciation and non-recoverable losses, if any. The cost includes the amount of acquisition of equipment and funding costs in connection with loans for long-term construction projects, provided that the recognition criteria are met. When significant items of property, plant and equipment are replaced, these items are recognized as individual assets, with specific useful lives and depreciations. Likewise, when a significant replacement is made, its cost is recognized in the book value of the equipment as replacement, provided that the recognition criteria are met. All the other repair and maintenance costs are recognized in the result for the year as incurred.
Category of assets Annual average depreciation rate | |
Buildings | 2.50% |
Improvements in own and third-party properties | 4.17% |
Machinery and equipment | 12.12% |
Installations | 8.19% |
Furniture and fixtures | 11.03% |
Other | 20.00% |
Property, plant and equipment and any significant parts are written off upon disposal or when they are not expected to generate any future economic benefit from their use or disposal. Any gains or losses resulting from the write-off of the assets are included in the result for the year.
The residual value, useful life of the assets and depreciation methods are reviewed at the closing of every year, and adjusted on prospective basis, when applicable. The Company reviewed the useful life of the property, plant and equipment in the year 2019 and concluded that there are no changes to be made in this fiscal year.
Interest of loans directly attributable to the acquisition, construction or production of an asset, which demands a substantial period of time to be finished for the intended use or sale (eligible asset), is capitalized as part of the cost of the respective assets during the construction phase. As of the date of commencement of operation of the corresponding asset, the capitalized costs are depreciated over the estimated useful life of the asset.
15.1. Reduction at recoverable value of non-financial assets
The impairment test aims to present the actual net realizable value of an asset. The realization can be directly or indirectly, through sale or cash generation in the use of the asset in the Company’s activities.
Every year, the Company conducts the impairment test of its tangible and intangible assets or whenever there is internal or external evidence that the asset can present loss on recoverable value.
The recoverable value of an asset is defined as the highest between its fair value or the
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
value in use of its cash generating unit - UGC, except if the asset does not generate cash inflows that are mostly independent from cash inflows from other assets or groups of assets.
If the book value of an asset or UGC exceeds its recoverable value, the asset is considered not recoverable and a provision is recognized in order to adjust the book value to its recoverable value. In the recoverable value evaluation, the estimated future cash flow is discounted to present value, adopting a discount rate, which represents the capital cost of the Company (WACC) which reflects current market evaluations in connection with the value of money over time and the specific risks of the asset.
16. Intangible Assets
Intangible assets acquired separately are measured at cost upon initial recognition, less amortization and non-recoverable losses, if any.
Internally generated intangible assets, excluding capitalized costs of development of software, are reflected in the result for the year in which they were incurred. Intangible assets comprise mainly software acquired from third parties, software developed for internal use, goodwill (right of use of stores), list of clients, advantageous lease agreements, advantageous agreements for supply of furniture and brands.
Intangible assets with definite useful life are amortized under the straight-line method. The period and amortization method are reviewed, at least, at the closing of the fiscal year. Changes in the estimated useful life or in the estimated standard use of the future economic benefits incorporated into the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting assumptions.
The costs of development of software recognized as asset are amortized over its definite useful life (5 to 10 years), whose amortization rate is 10.82%, and the amortization begins when the asset is put into operation.
Intangible assets with indefinite useful life are not amortized, but submitted to impairment tests at the closing of the fiscal year or whenever there is indication that their book value cannot be recovered, individually or at the level of the UGC. The evaluation is reviewed on annual basis to determine if the indefinite useful life remains valid. Otherwise, the useful life estimate is changed on prospective basis from indefinite to definite.
Gain or losses, when applicable, resulting from the derecognition of an intangible asset, are measured as the difference between net results from the disposal and the book value of the asset, being recognized in the result for the year upon write-off of the asset.
17. Financial Instruments
Financial assets are recognized when the Company assumes contractual rights to receive cash or other financial assets from contracts in which it is a party. Financial assets are derecognized when the rights to receive cash tied to financial assets expire or when the risks and benefits are substantially transferred to third parties. Assets and liabilities are recognized when rights or obligations are retained in the transfer by the Company.
Financial liabilities are recognized when the Company assumes contractual obligations for settlement in cash or assumes third-party obligations through a contract in which it is a party. Financial liabilities are derecognized when they are settled, extinguished or expired.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Purchases or sales of financial assets requiring delivery of assets within a term defined by regulation or convention in the market (negotiations under normal conditions)
are recognized on the negotiation date, that is, on the date in which the Company agrees to purchase or sell the asset.
17.1. Classification and measurement of financial assets and liabilities
Upon initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other results (“VJORA”) – or fair value through the result (“VJR”). The classification of financial assets is usually based on the business model where a financial asset is managed and has characteristics of contractual cash flows. Embedded derivatives in which the principal contract is a financial asset within the scope of the standard are never separated. In turn, the hybrid financial instrument is evaluated for classification as a whole.
A financial asset is measured at amortized cost if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is to maintain financial assets to receive contractual cash flows; and |
• | its contractual terms generate, on specific dates, cash flows related to the payment of principal and interest on the outstanding principal. |
A debt instrument is measured at VJORA if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is attained by the receiving of contractual cash flows as well as by the sale of financial assets; and |
• | its contractual terms generate, on specific dates, cash flows that are only payments of principal and interest on the outstanding principal. |
Upon initial recognition of an investment in equity instrument that is not held for trading, the Company may opt to irrevocably present subsequent changes in the fair value of investment in other Comprehensive Results (“ORA”). This option is made on investment by investment basis.
All financial assets not classified as measured at amortized cost or VJORA, as described above, are classified as VJR. This includes all derivative financial assets. Upon initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost, VJORA or VJR if this significantly eliminates or reduces an accounting mismatch which would otherwise arise (fair value option).
A financial asset (except for trade account receivable without a material financing component that is initially measured at the transaction price) is initially measured at fair value, plus, for an item not measured at VJR, transaction costs directly attributable to acquisition.
Financial assets measured at VJR - These assets are subsequently measured at fair value. The net result, including interest or income from dividends, is recognized in the result.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Financial assets at amortized cost - These assets are subsequently measured at amortized cost under the effective interest method. The amortized cost is reduced by losses on reduction to recoverable value. Interest income, and exchange gains and losses are recognized in the result. Any gain or loss on derecognition is recognized in the result.
Financial assets at VJORA - These assets are subsequently measured at fair value. Interest income is calculated under the effective interest method, exchange gains and losses and losses on reduction to recoverable value are recognized in the result. Other net results are recognized in ORA. Upon derecognition, the accumulated result in ORA is reclassified to the result.
17.2. Derecognition of financial assets and liabilities
A financial asset (or, as appropriate, part of a financial asset or part of a group of similar financial assets) is derecognized when:
• The rights to receive cash flows expire.
• | The Company transfers its rights to receive cash flows from the asset or the commitment to fully pay cash flows received to a third party, according to an onlending agreement; and (a) the Company has substantially transferred all the risks and benefits related to the asset; or (b) the Company did not transfer neither substantially retain all the risks and benefits related to the asset, but transferred its control. |
When the Company assigns its rights to receive cash flows from an asset or enters into onlending agreement, without having transferred or retained substantially all the risks and benefits related to the asset neither transferred the control of the asset, the asset is held and a corresponding liability is recognized. The transferred asset and the corresponding liability are measured in a way to reflect the rights and obligations retained by the Company.
A financial liability is derecognized when the underlying obligation is settled, cancelled or expired.
When a current financial liability is replaced by another from the same creditor, under substantially different terms, or when the terms of a current liability are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference between the respective book values is recognized in the result for the year.
17.3. Offsetting of financial Instruments
Financial assets and liabilities are offset and stated net in the financial statements, if, and only if, there is the right to offset values recognized and intention to settle on net basis or to realize the assets and settle the liabilities simultaneously.
18. Derivative Financial Instruments
The Company uses derivative financial instruments to put a limit on the exposure to the variation not related to the local market such as swaps of interest rates and swaps of exchange variation. These derivative financial instruments are initially recognized at fair value on the date in which the derivative contract is entered into and later remeasured at fair value at the closing of the fiscal years. The derivatives are recorded as financial assets when the fair value
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
is positive and as financial liabilities when negative. Gains or losses resulting from changes in the fair value of derivatives are recorded directly in the result for the year.
At the beginning of the hedge relation, the Company formally designates and documents the hedge relation to which it intends to apply hedge accounting, and its purpose and risk management strategy to contract it. The documentation includes identification of the hedge instrument, the item or operation covered by hedge, the nature of the hedged risk and how the Company should evaluate the efficiency of the changes in the fair value of the hedge instrument on the neutralization of the exposure to changes in the fair value of the item covered by hedge or the cash flow attributable to the hedged risk. These hedges are expected to be highly efficient on the neutralization of changes in fair value or cash flow, and are constantly evaluated to determine if they are actually being highly efficient over all the fiscal years of the financial reports to which they have been designated.
They are recorded as fair value hedges, following the procedures below:
• | The change in the fair value of a derivative financial instrument classified as fair value hedge is recognized as financial result. The change in the fair value of the hedged item is recorded as part of the book value of the hedged item, and is recognized in the statement of income for the year. |
• | Upon calculation of fair value, debts and swaps are measured at rates disclosed in the financial market and projected until their maturity date. The discount rate used for calculation under the method of interpolation of foreign currency loans is obtained through DDI curves, clean Coupon and DI, indexes disclosed by B3 and, for local currency loans it is used the DI curve, index disclosed by CETIP and calculated under the exponential interpolation method. |
The Company uses financial instruments only for protection against identified risks limited to 100% of the value of these risks. Operations with derivatives are solely used to reduce exposure to foreign currency and interest rate fluctuation, so as to maintain the stability of the capital structure.
19. Cash flow hedge
Derivative instruments are recorded as cash flow hedge, following the procedures below:
• | The efficient portion of gain or loss of the hedge instrument is recognized directly in the shareholders’ equity under Other Comprehensive Results, and if the hedge fails to meet the hedge ratio, but the risk management purpose remains unchanged, the Company should adjust (“rebalance”) the hedge ratio to meet the qualification criteria. |
• | Any remaining gain or loss in the hedge instrument (including from the “rebalance” of the hedge ratio) is an inefficiency and, therefore, should be recognized in the result. |
• | The values recorded under Other Comprehensive Results are immediately transferred to the statement of income together with the transaction object of hedge when affecting the result, for example, when a financial income or expense object of hedge is recognized or when an expected sale occurs. When the item object of hedge is the cost of a non-financial asset or liability, the values recorded in the shareholders’ equity are transferred to the initial book value of the non-financial asset or liability. |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | The Company should discontinue the hedge accounting on prospective basis only when the hedge relation fails to meet the qualification criteria (after taking into consideration any rebalance of the hedge relation). |
• | If the occurrence of the estimated transaction or firm commitment is no longer expected, the values previously recognized in the shareholders’ equity are transferred to the statement of income. If the hedge instrument expires or is sold, discontinued or exercised without replacement or rollover, or if its classification as hedge is cancelled, the gains or losses previously recognized in the comprehensive result remain deferred in the shareholders’ equity under Other Comprehensive Results until the expected transaction or firm commitment affects the result. |
20. Loss on recoverable value of financial assets
The Company adopts the expected credit loss model, which applies to financial assets measured at amortized cost, contractual assets and debt instruments measured at VJORA, but which does not apply to investments in equity instruments (shares) or financial assets measured at VJR.
Provisions for losses are measured at one of the following bases:
• | Credit losses expected for 12 months (general model): these credit losses result from possible events of default within 12 months from the balance sheet date, and subsequently, in case of deterioration of the credit risk, for the entire life of the instrument |
• | Credit losses expected for the entire life (simplified model): these credit losses result from all possible events of default over the expected life of a financial instrument |
• | Practical expedient: these credit losses are expected and consistent with reasonable and sustainable information available on the balance sheet date for past events, current conditions and forecast of future economic conditions, which allow to check future probable loss based on the historical loss occurred according to the maturity of the securities. |
The Company measures provisions for losses on accounts receivable and other receivables and contractual assets for a value equal to expected credit loss for the entire life, where for trade accounts receivable, whose portfolio of receivables is dispersed, leases receivable, wholesale accounts receivable and accounts receivable from carriers, it is applied the practical expedient through adoption of a matrix of losses for each maturity range.
When determining if the credit risk of a financial asset has significantly increased since the initial recognition and when estimating the expected credit losses, the Company considers reasonable and sustainable information that is relevant and available without excessive cost or effort. It includes information and quantitative and qualitative analyses, based on the historical experience of the Company, credit evaluation and considering information on projections.
The Company assumes that the credit risk of a financial asset has significantly increased if it is more than 90 days past due. The Company considers a financial asset as default when:
• | it is unlikely that the debtor will fully pay its credit obligations to the Company without resorting to actions such as realization of guarantee (if any); or |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• the financial asset is past due for more than 90 days.
The Company determines the credit risk of a debt security based on analysis of the history of payments, current financial and macroeconomic conditions of the counterparty and evaluation of rating agencies when applicable, thus assessing each security individually.
The maximum period considered in the estimate of expected credit loss is the contractual period during which the Company is exposed to the credit risk.
Measurement of expected credit losses – Expected credit losses are estimates weighted by the probability of credit losses based historical losses and projections of related assumptions. Credit losses are measured at present value based on all cash shortages (that is, the difference between cash flows payable to the Company according to agreement and cash flows that the Company expects to receive).
Expected credit losses are discounted at the effective interest rate of the financial asset.
Financial assets with credit recovery issues – On each presentation date, the Company assesses if the financial assets stated at amortized cost and the debt securities measured at VJORA present indications of loss on recoverable value. A financial asset presents indications of loss on recoverable value when there is one or more events with negative impact on the estimated future cash flows of the financial asset.
Presentation of loss on reduction to recoverable value - Provision for losses for financial assets measured at amortized cost are deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
Losses on reduction to recoverable value related to trade accounts receivable and other receivables, including contractual assets, are presented separately in the statement of income and ORA. Losses of recoverable values of other financial assets are presented in ‘selling expenses’.
Accounts receivable and contractual assets - The Company considers the model and certain assumptions adopted in the calculation of these expected credit losses as the principal sources of uncertainty of the estimate.
The positions in each group were segmented based on usual characteristics of credit risk, such as:
• | Level of credit risk and history of losses – for wholesale clients and lease of properties; and |
• | Default status, risk of default and history of losses - for credit card companies and other clients. |
21. Provision for lawsuits
The provisions are recognized when the Company has a present obligation (legal or not formalized) in view of a past event, it is probable that cash outflow will be required to settle the obligation, and it is possible to make a reliable estimate of the value of this obligation. Expenses related to the provision are recorded in the result for the year, net of reimbursement. For success fees, the Company and its subsidiaries recognize a provision when the fees are
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
incurred, that is, upon final judgment of the lawsuits, being disclosed in the notes, the amounts involved in the lawsuits not yet concluded.
The assessment of the chance of loss includes analysis of available evidences, hierarchy of the laws, available case laws, the most recent court decisions, legal relevance, the history of occurrence and amounts involved and external lawyers’ opinion.
The provision for lawsuits is estimated by the Company and corroborated by its legal advisors and it was recognized in an amount considered sufficient to cover probable losses.
22. Commercial lease operations
Upon signing of contract, the Company assesses if it is, or contains, a lease. The contract is, or contains, a lease when it transfers the right of control over the use of an identified asset for a given period in exchange for payment.
The Company leases equipment and commercial spaces, including stores and distribution centers, under cancellable and non-cancellable commercial lease. The terms of the contracts range substantially from 5 to 25 years.
The Company as lessee
The Company assesses its lease contracts in order to identify relations of lease of a right of use, using exemptions provided for contracts under 12 months and where the individual amount of the asset is below US$ 5,000 (five thousand dollars). The contracts are then recorded, upon beginning of the lease, as Lease Liabilities against the Right of Use, both at the present value of minimum lease payments, using the implicit interest rate of the contract, if it can be used, or incremental interest rate considering loans obtained by the Company.
The lease term used in the measurement corresponds to the term that the lessee is reasonably certain to exercise the option to extend the lease or not to exercise the option to rescind the lease.
Subsequently, payments made are segregated between financial charges and reduction of lease liabilities, in order to obtain a constant interest rate on the balance of liabilities. The financial charges are recognized as financial expense for the period.
The right of use assets under lease contracts are amortized over the lease term. The capitalization of improvements, renewals and renovations in stores are amortized over their estimated useful life or over the expected term of use of the asset, unless there is evidence that the lease contract will not be extended.
Variable rents are recognized as expenses in the years in which they are incurred.
The Company as lessor
Commercial leases in which the Company does not transfer substantially all the risks and benefits from the ownership of the asset are classified as operating commercial leases. The initial direct trading costs of commercial leases are added to the book value of the leased asset and recognized over the term of the contract, on the same base of rent income.
Free translation |
Variable rents are recognized as revenue in the fiscal years in which they are earned.
23. Revenues to be accrued
Unearned revenues are recorded by the Company as liability for the anticipation of amounts received from commercial partners for the exclusivity in the provision of intermediation services for complementary or extended guarantees and values referring to the rental of gondola ends and backlight panels for displaying suppliers' products, and are recognized on the result for the year upon proof of service regarding the sale of these guarantees to business partners.
Free translation |
EXHIBIT 3 |
SENDAS DISTRIBUIDORA S.A.
Value of the investment and Bellamar Empreendimentos e Participações Ltda.
FINANCEIRA ITAÚ CBD S/A CRÉDITO. FINANCIAMENTO E INVESTIMENTO
Shareholders | Ordinary shares | % | Market Value | |||
Itau Unibanco | 453,683,262 | 50% | 2,150,404,150.48 | |||
Bellamar Empreend. e Partic. Ltda | 324,501,114 | 35.7630% | 1,538,096,290.58 | |||
Lake Niassa Empreend. e Partic. Ltda. | 129,182,147 | 14.2370% | 612,307,855.16 | |||
Companhia Brasileira de Distribuição | 1 | 0.0000% | 4.74 | |||
Conselho | 8 | 0.0000% | 37.92 | |||
907,366,532 |
100,0000% |
4,300,808,338.88 |
The shares of Financeira Itaú CBD S.A. were valued independently and the appraisers
establish the value of the company's shares in a space of R$ 4.69 to R$ 4.93 per share.
In this evaluation, an average value of R$ 4.7399 was adopted.
Accordingly, the market value of Financeira Itaú CBD S.A. is R$ 4,300,808,338.88.
The market value of Bellamar's investment in FIC considering its participation and, as
shown above, is R$ 1,538,096,290.58.
BELLAMAR EMPREENDIMENTOS E PARTICIPAÇÕES LTDA
Quotaholders | Ordinary shares | % | Equity value | Market Value | ||||
Companhia Brasileira de Distribuição | 13,882,756,895 | 99.999% | 377,117,939.44 | 1,538,096,179.79 | ||||
Sendas Distribuidora S.A. | 1,000 | 0.0001% | 27.16 | 110.79 | ||||
13,882,757,895 |
100,0000% |
4,300,808,338.88 |
1,538,096,290.58 |
Consequently, the value of the CBD investment in Bellamar follows the same logic, with an amount of R$1,538,096,179.79.
In the barter, CBD delivers to SENDAS 50% (fifty percent) of the shares of Bellamar Empreendimentos e Participações S.A., for a market value of R$ 769,048,145.29.
Free translation |
EXHIBIT 4 |
SENDAS DISTRIBUIDORA S.A. |
Description of the properties to be delivered in the Barter |
APPRAISAL REPORTS AT MARKET VALUE AND DESCRIPTION OF THE PROPERTIES
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 5 |
SENDAS DISTRIBUIDORA S.A. |
Description of the real estate property located at Av. Tancredo Neves |
DESCRIPTION OF PROPERTIES TO BE DELIVERED FOR CAPITAL CONTRIBUTION
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 6 |
SENDAS DISTRIBUIDORA S.A.
Adjustments related to barters between CBD and Sendas
(amount in reais)
An agreed condition to make the spin-off and merger feasible is the exchange of assets and the increase in capital of CBD in SENDAS. As a result of the exchange, the need arises to make certain adjustments, as listed below. The balance sheet which serves as the basis for the assessment needs to reflect these exchange and capital increases in order to include the impacts on equity resulting from them.
Order | Accounts | Debit | Credit |
1 | Investments (Bellamar - exchange) Fixed assets (Lands) Investments Éxito | 769,048,145.29 145,610,000.00 | 914,658,145.29 |
By barter, CBD delivers to Sendas part of the shares it owns in Bellamar, plus 6 lands and receives from Sendas part of the shares that Sendas holds in Éxito | |||
2 | Cash and cash equivalents Current account liability balance with CBD Fixed assets - properties Capital stock Capital reserve | 500,000,000.00 140,142,381.00 44,537,506.09
|
684,679,830.10 56.99 |
Capital increase to be carried out in December / 20, with surplus to capital reserve | |||
3 | Asset – Credit with CBD Retained Earnings | 114,116,565.25 | 114,116,565.25 |
Provision for credits arising from the refunding agreement for passive contingencies in Sendas that become materialized | |||
4 | Liability - Deferred IR and CSLL Retained Earnings | 49,000,000.00
| 49,000,000.00 |
Reversal of Deferred IR and CSLL |
Free translation |
EXHIBIT 7 |
SENDAS DISTRIBUIDORA S.A.
Balance sheet after adjustments for spin-off
(amount in reais)
Balance on September 30, 2020 | Commitment to the Spin-off | Balance after adjustment to spin-off | ||||
nº | Debit | Nº | Credit | |||
ASSETS | ||||||
Current | ||||||
Cash and Cash Equivalents | 2,289,782,982.42 | 2 | 500,000,000.00 | 2,789,782,982.42 | ||
Receivable accounts | 221,430,077.77 | 221,430,077.77 | ||||
Inventories | 3,312,953,305.29 | 3,312,953,305.29 | ||||
Recoverable taxes | 580,344,674.91 | 580,344,674.91 | ||||
Prepaid expenses | 31,166,295.18 | 31,166,295.18 | ||||
Non current assets for sale | - | - | ||||
Receivable Dividends | - | - | ||||
Other | 13,326,703.92 | 13,326,703.92 | ||||
Derivative Financial Instruments - Foreign Currency | 79,749,557.53 | 79,749,557.53 | ||||
Total current asset | 6,528,753,597.02 | 7,028,753,597.02 | ||||
Non-current | ||||||
Long term receivable | ||||||
Receivable accounts | - | - | ||||
Deferred Income Tax and Social Contribution | - | - | ||||
Prepaid expenses | 1,000,000.00 | 1,000,000.00 | ||||
Credits with Related Parties | 22,941,213.66 | 3 | 114,116,565.25 | 37,057,778.91 | ||
Recoverable Taxes | 867,732,072.45 | 867,732,072.45 | ||||
Deposits for Judicial Appeal | 112,071,529.61 | 112,071,529.61 | ||||
Financial Instruments - Fair value hedge | 10,843,333.82 | 10,843,333.82 | ||||
Total Long-term receivables | 1,014,588,149.54 | 1,128,704,714.79 | ||||
Investments | 10,073,960,080.58 | 1 | 769,048,145.29 | 1 | 914.658.145,29 | 9,928,350,080.58 |
Fixed assets | 6,923,737,185.73 | 1.2 | 190,147,506.09 | 7,113,884,691.82 | ||
Intangible asset | 1,036,644,985.09 | 1,036,644,985.09 | ||||
Total – non-current assets | 19,048,930,400.94 | 19,207,584,472.28 | ||||
TOTAL ASSETS | 25,577,683,997.96 | 26,236,338,069.30 |
Free translation |
|
SENDAS DISTRIBUIDORA S.A.
Balance sheet after adjustments for spin-off
Free translation |
EXHIBIT 8 |
SENDAS DISTRIBUIDOR A S.A.
Balance sheet after adjustments for spin-off
(amount in reais)
Free translation |
|
SENDAS DISTRIBUIDOR A S.A.
Balance sheet after adjustments for spin-off
Free translation |
Exhibit 5.1(iii)
Sendas’ Protocol
PARTIAL SPIN-OFF PROTOCOL OF SENDAS DISTRIBUIDORA S.A. WITH MERGER OF THE SPUN-OFF PORTION INTO COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
By the present private instrument and in strict accordance with the law, the Parties, qualified below:
I. | COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, a publicly-held company headquartered in the City of São Paulo, State of São Paulo, at Avenida Brigadeiro Luís Antônio, 3.172, Jardim Paulista, Zip Code 01402-000, enrolled with CNPJ/ME under the No. 47.508.411/0001-56, herein represented according to its bylaws (“CBD”); and |
II. | SENDAS DISTRIBUIDORA S.A., a publicly-held company headquartered in the City of Rio de Janeiro, Estado do Rio de Janeiro, at Avenida Ayrton Senna, Lot 2 Pal 48959, Exhibit A, Jacarepaguá, Zip Code 22775-005, enrolled with CNPJ/ME under the No. 06.057.223/0001-71, herein represented according to its bylaws or (“SENDAS”) and, with the CBD, referred to as “Parties”, or, individually, “Party”). |
WHEREAS:
A. | CBD intends to segregate the cash and carry unit (wholesale self-service activity) by means of the CBD’s partial spin-off transaction upon merger of the Sendas’ spun-off portion (“CBD’s Spin-off”), which spun-off portion is composed of the shareholding interest held by CBD in SENDAS, equivalent to, as of the date hereof, one hundred percent (100%) of the shares issued by SENDAS, which, by virtue of the CBD’s Spin-off, shall be directly delivered to the CBD’s shareholders proportionally to the shareholders’ investments in the CBD’s capital; |
B. | Before the CBS’ Spin-off, the Parties intend to perform the partial spin-off of Sendas, the CBD’s wholly-owned subsidiary, upon merger of the spun-off portion by the Company (“Sendas’ Spin-off” being Sendas’s Spin-off in conjunction with CBD’s Spin-off hereinafter referred to as the “Transaction”), that is, (a) the shareholding interest equivalent to approximately ninety point ninety-three percent (90.93%) of the total shares held by Almacenes Éxito S.A., company established and existing in accordance with the laws of Colombia, headquartered in Envigado, Departamento de Antioquia, Colombia, enrolled with CNPJ/ME under nº 23.041.875/0001-37 (“Éxito”), held by Sendas, corresponding to three hundred and ninety-three million, ten thousand, six hundred and fifty-six (393,010,656) shares, equivalent to approximately eight-seven point eighty percent (87.80%) of the total shares issued by Éxito (“Éxito’s Shareholding Interest”); (b) |
Free translation |
six (6) gas stations owned by Sendas (“Operating Assets” and the Operating Assets in conjunction with Éxito’s Shareholding Interest hereinafter referred to as, collectively, the “Sendas’ Spun-off Portion”);
C. | Before the Sendas’ Spin-off and in order to achieve the same purpose of the Transaction, CBD shall deliver certain assets to be subsequently developed by Sendas, and Sendas shall deliver a portion of the shares representing the Éxito’s capital stock, by means of an exchange transaction; |
D. | In connection with the Transaction, the Parties carried out intend to perform (i) other transactions, as further described in section 4.2.1 below, which shall take place from the Base Balance Sheet, as defined below, to the date on which the CBD’s and Sendas’ Shareholders’ Meetings have approved the Transaction (“Preparatory Procedures”); and |
E. | In connection with the purpose described above, the Parties’ respective managements deemed convenient and appropriate, by virtue of operational reasons, proceed with the Sendas’ Spin-off, removing from assets and, consequently, equity, the shareholding interest held in Éxito and Operating Assets, which shall be directly held by CBD, as well as implement the other Preparatory Procedures, as described below. |
ACCORDINGLY, the Parties resolved, as set forth in article 223 and following articles of Law 6404, of December 15, 1976 (“Brazilian Corporation Law”) and Instruction 565, of June 15, 2015, issued by the Brazilian Securities and Exchange Commission, to enter into this Partial Spin-off Merger of Sendas Distribuidora S.A, with Merger of the Spun-off Portion into Companhia Brasileira de Distribuição (“Protocol”), under the terms and conditions set forth below.
I. PURPOSE
1.1. The purpose of this Protocol is to define the terms, conditions and explanations of the CBD’s Spin-off, upon a portion of the SENDAS’ equity (“Spun-off Portion”), which shall be incorporated by CBD, under the terms set forth in article 229, paragraph 3, of the Brazilian Corporation Law.
II. SENDAS’ SPIN-OFF REASONS AND EXPLANATIONS AND INTEREST OF THE PARTIES FOR ITS ACHIEVEMENT
Free translation |
2.1 Based on the Material Fact disclosed by CBD and SENDAS to the shareholders and the market in general on September 9, 2020, the purpose of the Transaction is to achieve the full potential of the cash & carry business under the mark “Assai” developed by SENDAS and the traditional retail business to be developed by CBD and its subsidiaries, operated on an independent basis, with separate management focused on the respective business models and market opportunities. Additionally, the Transaction shall permit direct access to the capital market and other financing sources to each of the businesses to focus on the investment priorities in conformity with the profile of each company, creating, therefore, more value to the respective shareholders.
2.1.1. Upon implementation of the Transaction, the shares issued by SENDAS and held by CBD are directly delivered to the CBD’s shareholders, proportionally to the shareholding interest held in the CBD’s capital stock. Such distribution shall take place after SENDAS has obtained the authorization to list its shares in the B3’s “Novo Mercado” segment S.A. – Brasil, Bolsa, Balcão (“B3”), dedicated to the companies that comply with the highest corporate governance level standards, in addition to the listing of the ADSs representing the SENDAS’ shares in the New York Stock Exchange (“NYSE”). Such listing shall comply with the corporate governance standard that is similar to that currently adopted by CBD, which is already listed in the “Novo Mercado” segment and NYSE. After the obtaining of such registries, SENDAS and CBD shall disclose the Notices to the Shareholders to inform the distribution dates of the SENDAS’ shares and the initial trading date thereof in the securities market.
2.2. In the context of the Transaction, more specifically with respect to the separation of the cash & carry transactions and the traditional retail transactions (multi retail), IT SHALL TAKE PLACE Sendas’ Spin-off, aiming to transfer to CBD: (i) the shareholding interest in Éxito, currently held by SENDAS, remaining after the exchange transaction referred to in section 2.2.1 below; and (ii) the Operating Assets, as described in the Appraisal Report, below defined.
2.2.1. Firstly, however as part of the Transaction, CBD and SENDAS shall conduct the exchange of assets, as further described in section 4.3 below, which exchange shall transfer to CBD a portion of the shareholding interest in Éxito held by SENDAS, upon receipt of certain assets owned by CBD to be developed by SENDAS.
III. CONSTITUENT ELEMENTS OF SPUN-OFF PORTION AND LACK OF SOLIDARITY
3.1. The Partial Spin-off shall be conducted “line by line” of the spun-off equity accounts for
Free translation |
purposes of accounting in SENDAS, as referred to in the appraisal report of the Spun-off Portion, as further described in section 4.4. below (“Appraisal Report”), included in this Protocol in the form of Exhibit 3.1
3.2. The Parties shall not be jointly responsible by virtue of the CBD’s Spin-off, as set forth in article 233, sole paragraph, of the Brazilian Corporation Law.
IV. APPRAISAL COMPANY, BASE DATE, SPUN-OFF PORTION APPRAISAL AND TREATMENT OF NET EQUITY VARIATIONS.
4.1. The preparation of the Appraisal Report is under the responsibility of specialized company Magalhães Andrade Auditores Independentes S/S, enrolled with Regional Accounting Council of the State of São Paulo, under the No. 2SP000233/O-3 and with CNPJ/ME under the No. 62.657.242/0001-00, with head office in the City of São Paulo, State of São Paulo, at Av. Brigadeiro Faria Lima, nº 1.893, 6th floor, Jardim Paulistano (“Appraisal Company”).
4.1.1. The Parties’ shareholders shall ratify the indication of the Appraisal Company for preparation of the Appraisal Report at the Extraordinary General Meetings held to address the present Protocol, in conformity with the terms set forth in paragraph 1, article 227, of the Brazilian Corporation Law.
4.1.2. The Appraisal Company (i) is not interested, directly or indirectly, in the Parties or Transaction, as well as any other relevant circumstance that could characterize a conflict of interest; and (ii) is not aware of any action undertaken by the controller or directors and executive officers of the Parties to direct, limit, hamper or otherwise undertake any acts that impacted or could have impacted the access, use or knowledge of information, documents or work methodologies deemed relevant for the quality of conclusions.
4.2. For the purposes of the Sendas’ Spin-off, the Spun-off Portion was evaluated based on the respective book value, according to the balance sheet revised at September 30, 2020 (“Base Balance Sheet”), included in the present Protocol in the form of Exhibit 4.2.
4.2.1. For the purposes of the Sendas’ Spin-off, the Preparatory Procedures shall have been recognized in the Base Balance Sheet, as described in detail below:
(i) the increase in SENDAS’ capital stock in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred
Free translation |
and eighty-seven reais and nine cents (R$ 684,679,887.09), being six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and thirty and ten cents (R$ 684,679,830.10) allocated to the corporate capital of SENDAS and fifty-six reais and ninety-nine cents (R$ 56.99) to the capital reserve of SENDAS. Such increase shall be made in assets, cash and credits, being forty-four million, five hundred and thirty-seven thousand, five hundred and six reais and nine cents (R$ 44,537,506.09), upon delivery of the net assets of the stores for future development by SENDAS, five hundred million reais (R$500,000,000.00) in cash and one hundred and forty million, one hundred and forty-two thousand, three hundred and eighty-one reais (R$140,142,381.00) upon capitalization of the credits held by CBD, to be resolved at the SENDAS’ Extraordinary Shareholders’ Meeting, which shall approve the Transaction, resulting in the issuance of eighteen million, six hundred and sixty-one thousand, three hundred and sixty-eight (18,661,368) Sendas’ registered common shares, with no par value, which capital shall increase from four billion, seven hundred and forty-nine million, two thousand, two hundred and four reais and ninety-three cents (R$4,749,002,204.93) to five billion, four hundred and thirty-three million, six hundred and eighty-two thousand, thirty-five reais and three cents (R$5,433,682,035.03), divided into two hundred and eighty-seven million, twelve thousand, nine hundred and thirty five (287,012,935) registered common shares, with no par value; and
(ii) the recognition of certain assets and liabilities arising from the transactions carried out between CBD and SENDAS and that are being defined in connection with the Transaction, as described in detail in the instrument entered into between the Parties (“Corporate Separation Agreement”), totaling the net equity value of one hundred and sixty three million, one hundred and sixteen thousand, five hundred and sixty-five reais and twenty-five cents (R$163,116,565.25).
4.3. In the context of the Transaction, and as part of the Sendas’ Spin-off, CBD shall exchange some assets, totaling nine hundred and fourteen million, six hundred and fifty-eight thousand, one hundred and forty-five reais and twenty-nine cents (R$914,658,145.29) (“CBD’s Assets”), for approximately nine point seven percent (9.07%) of the Éxito’s total shares held by SENDAS, corresponding to thirty-nine million, two hundred and forty-six thousand and twelve (39,246,012) shares, equivalent to approximately eight point seventy-seven percent (8.77%) of the total shares issued by Éxito (“Sendas’ Assets”). The composition of the CBD’s Assets is as follows:
Free translation |
(i) fifty percent (50%) of the quotas representing the capital stock of Bellamar Empreendimento e Participações Ltda., enrolled with CNPJ/ME under No. 06.950.710/0001-69, which holds thirty-five point seventy-six (35.76%) of the capital stock of Financeira Itaú CBD S.A. – Crédito, Financiamento e Investimento, enrolled with CNPJ/ME under No. 06.881.898/0001-30, totaling seven hundred and sixty-nine million, forty-eight thousand, one hundred and forty-five reais and twenty-nine cents (R$769,048,145.29); and
(ii) Real Estate located in the City of Ribeirão Preto, State of São Paulo, at Rua Emílio Moço, s/nº, registered with public deeds under nºs 55.832, 55.833, 55.834 and 79.480 of the 2nd Real Estate Registry Office of Ribeirão Preto/SP; Real Estate located in the City of Feira de Santana, State of Bahia, at Avenida Presidente Dutra, nº 2.700, Bairro Santa Mônica, registered with public deeds under nºs 33.844 and 33.846 of the 2nd Real Estate Registry Office of Feira de Santana/BA; Real Estate located in the City of Campo Grande, State of Mato Grosso do Sul, at Avenida Bandeirantes, nº 3.270, Bairro Bandeirantes, registered with public deeds under nºs 1.319 and 25.760 of the 2nd Real Estate Registry Office of Campo Grande/MS; Real Estate located in the City of Americana, State of São Paulo, at Rodovia Luis Queiroz (SP-304), Jardim Thelja, registered with public deed under nº 67.954 of the Real Estate Registry Office of Americana/SP; and Real Estate located in the City of Fortaleza, State of Ceará, at Avenida Bernardo Manuel, nº 11.350, Bairro Itaperi, registered with public deed under nº 44.795 of the 2nd Real Estate Registry Office of Fortaleza/CE, totaling one hundred and forty-five million and six hundred and ten thousand reais (R$145,610,000.00).
4.4. As a result of the appraisal, taking into consideration the information and documents requested to the Parties’ managements, as well as the information available in the market and the information provided by the Appraisal Company, as deed necessary and, also considering the Preparatory Procedures for the appraisal, the Appraisal Company delivered to the Parties the Appraisal Report, which amounts are subject to the analysis and approval at the Parties’ Extraordinary Shareholders’ Meetings, as set forth in the Brazilian Corporation Law.
4.4.1. As referred to in the Appraisal Report, the net equity value of the Spun-off Portion, representing the balance of the investment in Éxito, corresponding to three hundred and ninety-three million, ten thousand, six hundred and fifty-six (393,010,656) Éxito’s shares, and the other Operating Assets, as calculated by the Appraisal Company, is nine billion, one hundred and
Free translation |
seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents (R$9,179,401.918.45).
4.4.2. The SENDAS’ assets and liabilities that do not compose the Spun-off Portion shall remain as the SENDAS’ assets and liabilities.
4.5. SENDAS shall exclusively assume the changes in SENDAS’ net equity between the Base Balance Sheet date and the completion date of the Sendas’ Spin-off, as reflected in CBD under the equity method of accounting.
V. COMPANIES’ STATUS BEFORE THE SENDAS’ SPIN-OFF
5.1. The SENDAS’ capital, before the Parties’ Extraordinary Shareholders’ Meetings held to approve the Sendas’ Spin-off and already considering the effects of the capital increase described in item (i) of clause 4.2.1, fully subscribed and paid, shall be five billion, four hundred and thirty-three million, six hundred and eighty-two thousand, thirty-five reais and three cents (R$5,433,682,035.03), divided into two hundred and eighty-seven million, fifteen thousand, one hundred and ninety-two (287,015,192) registered common shares, with no par value.
5.2. CBD’s capital stock on September 30, 2020, fully subscribed and paid, was of six billion, eight hundred and sixty-five million, two hundred and twenty thousand, one hundre3d and forty reais and two cents (R$ 6,865,220,140.02), divided into two hundred and sixty-eight million, three hundred and thirty-six thousand, two hundred and twenty-six (268,336,226) registered common shares, with no par value. On October 28, 2020 CBD’s Board of Directors approved the increase of the capital in the amount of six hundred and nine Thousand, four hundred and nine reais and five cents (R$ 609,409.05), by means of the issuance of fifteen thousand, three hundred and forty-one (15,341) common shares. Therefore, CBD’s capital stock, before the Parties’ Extraordinary Shareholders’ Meeting held to resolve on the Sendas’ Spin-off, fully subscribed and paid, is six billion, eight hundred and sixty-five million, eight hundred and twenty-nine thousand, five hundred and forty-nine reais and seven cents (R$6,865,829,549.07), divided into two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.
VI. CALCULATION OF SHARE EXCHANGE RATIO
6.1. According to the opinion issued by the Brazilian Securities and Exchange Commission, dated February 15, 2018, in connection with Proceeding SEI 19957.011351/2017-21 (“CVM
Free translation |
Opinion”), the Parties’ net equity is not subject to evaluation for purposes of calculation of the share exchange ratio, as set forth in article 264 of the Brazilian Corporation Law, in merger transactions between a wholly-owned subsidiary and a parent company, as, due to the absence of the non-controlling shareholder, the essential condition provided for in such legal provision is not verified.
VII. COMPANIES’ STATUS AFTER THE SENDAS’ SPIN-OFF
7.1. In connection with the Sendas’ Spin-off, the SENDAS’ capital shall be reduced by four billion, six hundred and seventy-two million, four hundred and seven thousand, nine hundred reais and twenty-five cents (R$ 4.672.407.900,25), from five billion, four hundred and thirty-three million, six hundred and eighty-two thousand, thirty-five reais and three cents (R$5,433,682,035.03) to seven hundred and sixty-one million, two hundred and seventy-four thousand, one hundred and thirty-four reais and seventy-eight cents (R$ 761,274,134.78), maintaining the same number of the SENDAS’ shares on the date immediately before the CBD’s Spin-off, that is, two hundred and eighty-seven million, twelve thousand, nine hundred and thirty-five (287,012,935) registered common shares, with no par value, owned by CBD, observed the provisions set forth in clause 7.1.1 below.
7.1.1. In conformity with the proportion defined in clause 2.1.1 above, at the same Sendas’ Extraordinary Shareholders’ Meeting held to approve the Sendas’ Spin-off, the shares shall be grouped so that the capital is represented by two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.
7.1.2. As set forth in Whereas Clause “A” above and in connection with the CBD’s Spin-off, if approved, the SENDAS’ capital shall not change by virtue of the merger of the spun-off portion. Without prejudice, the total two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) SENDAS’ registered common shares, with no par value – owned by CBD on the date immediately before the CBD’s Spin-off, considering the effects from the grouping of the SENDAS’ shares referred to above – are delivered to the CBD’s shareholders in accordance with the provisions set forth in clauses 2.1.1 and 7.1.1 above, provided that CBD shall remain the owner of approximately one hundred and sixty-five thousand (165,000) SENDAS’ registered common shares, with no par value, corresponding to approximately zero point zero six percent (0.06%) of the capital, representing the same number of the CBD’s shares held in treasury on the date immediately before the CBD’s Spin-off.
Free translation |
7.2. By virtue of the SENDAS’ capital stock reduction, as set forth in section 7.1 above, article 4, of the SENDAS’ Bylaws, shall become effective with the following wording:
“Article 5º - The Company’s capital stock is seven hundred and sixty-one million, two hundred and seventy-four thousand, one hundred and thirty-four reais and seventy-eight cents (R$ 761,274,134.78), fully subscribed and paid, divided into two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.”
7.3. Considering that Sendas is the CBD’s wholly-owned subsidiary and that SENDAS’ equity was partially spun off, upon delivery to CBD of (i) the Sendas’ investment in Éxito and (ii) the Operating Assets, the Sendas’ Spin-off shall not result in capital increase or issuance of new shares by CBD.
VIII. CORPORATE APPROVALS
8.1. The completion of the Sendas’ Spin-off shall depend on the following approvals:
a. | CBD’s Fiscal Council’s Meeting to opine on the Sendas’ Spin-off, as set forth in article 163, III, of the Brazilian Corporation Law; |
b. | CBD’s Audit Committee’s Meeting to analyze, revise and recommend the measures and actions in connection with the Sendas’ Spin-off; |
c. | CBD’s Financial Committee’s Meeting to analyze, revise and recommend the measures and actions in connection with the Sendas’ Spin-off; |
d. | CBD’s Board of Directors’ Meeting to resolve on the submission of the proposal for the Sendas’ Spin-off, under the terms set forth in this Protocol, for approval at the CBD’s Extraordinary Shareholders’ Meeting; |
e. | Sendas’ Board of Directors’ Meeting to resolve on the submission of the proposal for the SENDAS’ Spin-off, under the terms set forth in this Protocol, for approval at the SENDAS’ Extraordinary Shareholders’ Meeting; |
f. | SENDAS’ Extraordinary Shareholders’ Meeting to (a) approve the terms and |
Free translation |
conditions set forth in this Protocol; (b) upon approval of the Protocol, ratify the indication of the Appraisal Company, responsible for the preparation of the Appraisal Report; (c) approve the Appraisal Report prepared by the Appraisal Company; (d) upon approval of the Appraisal Report, approve the Sendas’ Spin-off, under the terms set forth in this Protocol; (e) authorize the SENDAS’ management to undertake the necessary measures to register the Sendas’ Spin-off before the proper bodies; and (f) other matters related to the Transaction; and
g. | CBD’s Extraordinary Shareholders’ Meeting to (a) approve the terms and conditions set forth in this Protocol; (b) upon approval of the Protocol, ratify the indication of the Appraisal Company, responsible for the preparation of the Appraisal Report; (c) approve the Appraisal Report prepared by the Appraisal Company; (d) upon approval of the Appraisal Report, approve the CBD’s Spin-off, under the terms set forth in this Protocol; and (e) authorize the CBD’s management to undertake the necessary measures to register the CBD’s Spin-off before the proper bodies; and (f) other matters related to the Transaction. |
IX. WITHDRAWAL RIGHT
9.1. The withdrawal right set forth in article 137 of the Brazilian Corporation Law is not applicable considering that the Spun-off Company is the CBD’s wholly-owned subsidiary and that CBD, the Spun-off Company’s sole shareholder, shall approve the Sendas’ Spin-off.
X. GENERAL PROVISIONS
10.1. The Preparatory Procedures and other corporate acts bound to the Transaction are effective upon approval of this Protocol at the Parties’ Shareholders’ Meetings held to resolve on the Transaction.
10.2. The costs and expenses incurred in relation to the Sendas’ Spin-off and all related transactions are equally payable by the Parties.
10.3. The Parties’ managements, however the case may be, shall undertake all necessary acts, registries and notarizations to implement the Sendas’ Spin-off, including the filing and disclosure of all acts related to the Sendas’ Spin-off, as set forth in article 229, paragraph 4, of the Brazilian Corporation Law, as well as undertake the necessary registries before the proper bodies.
Free translation |
10.4. The Parties shall solely amend this Protocol upon notice in writing, subject to the Parties’ legal representatives' signature.
10.5. The failure or delay of any of the Parties to exercise any of the rights referred to herein shall not be deemed a waiver or novation and shall not affect the subsequent exercise of such right. Any waiver shall take effect only if made explicitly in writing.
10.6. The potential statement by any court of nullity or ineffectiveness of any of the covenants included herein shall not jeopardize the validity and effectiveness of the other covenants, which shall be fully complied with, and the Parties undertake to use their best efforts in order to validly adjust such covenant to obtain the same effects of the null or ineffective covenant.
10.7. This Protocol shall be executed on an unconditional and irrevocable basis, binding the parties and successors thereto on any account.
10.8. The assignment of any of the rights and obligations agreed upon herein is not permitted without the prior and express written consent of each Party.
10.9. The Parties elect the courts of the City of São Paulo, State of São Paulo, to the exclusion of any other, to settle any and all doubts and conflicts arising from this Protocol.
And, for being fair and contracted, the parties sign the present instrument in six (6) counterparts of same form and content, in the presence of the two undersigned witnesses.
São Paulo, December 09, 2020
SENDAS DISTRIBUIDORA S.A.
/s/ Belmiro de Figueredo Gomes By: Belmiro de Figueredo Gomes Title: Chief Executive Officer | /s/ Daniela Sabbag Papa By: Daniela Sabbag Papa Title: Investors Relation Officer |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Free translation |
/s/ Christophe José Hidalgo By: Christophe José Hidalgo Title: Interim Chief Executive Officer, Finance Vice-President and Invertors Relation Officer | /s/ Jorge Faiçal By: Jorge Faiçal Title: Multi Retail President |
WITNESSES:
1. /s/ Mayara Zolko | 2. /s/ Donilo Marins |
Name: Mayara Zolko | Name: Donilo Marins |
ID | ID |
CPF/ME | CPF/ME |
Free translation |
Exhibit 3.1
Appraisal Report
[Page intentionally left in blank]
Free translation |
SENDAS DISTRIBUIDORA S.A. | ||
Appraisal report at book value on the net assets for purposes of spin-off with merger | ||
November 23, 2020 | 1 00 036/20 | |
Free translation |
Dear Shareholders of
SENDAS DISTRIBUIDORA S.A. and of
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
MAGALHÃES ANDRADE S/S AUDITORES INDEPENDENTES, audit and consulting firm, enrolled with the Regional Accounting Council of the State of São Paulo under number 2SP000233/O-3, registered with the National Registry of Legal Entities under number 62.657.242/0001-00 and located at Av. Brigadeiro Faria Lima, 1893 – 6th floor, Jardim Paulistano, São Paulo, Capital, appointed by you as expert to carry out the appraisal of the net assets at fair value of SENDAS DISTRIBUIDORA S.A., for purposes of partial spin-off with merger into the equity of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, fulfilled the diligences and verifications required for the performance of its work, presents this instrument.
APPRAISAL REPORT
which is subscribed.
São Paulo, November 23, 2020
MAGALHÃES ANDRADE S/S
Auditores Independentes
CRC2SP000233/O-3
GUY ALMEIDA ANDRADE
Accountant CRC1SP116758/O-6
Free translation |
INTRODUCTION
1. | The purpose of this spin-off and merger transaction is to separate certain assets of SENDAS DISTRIBUIDORA S.A. (SENDAS), which shall be merged into COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (CBD), in order to release the potential cash & carry business developed by SENDAS and the traditional retail business to be developed by CBD and its subsidiaries, for purposes of independent operation, with separate management and focused on the respective business models and market opportunities. In addition, by virtue of the Sendas’ Spin-off, each business shall have direct access to the capital market and other financing sources, to focus on the investment needs according to the profile of each company, creating, therefore, more value to the respective shareholders. |
2. | The spun-off company SENDAS is the wholly-owned subsidiary of the merging company CBD. |
3. | Therefore, the present Report, has the purpose of determining the book value of the net assets to be spun-off and merged, taking into account the financial position of SENDAS on September 30, 2020. |
4. | Accordingly, we analyzed the SENDAS’ balance sheet on the base appraisal date. |
MANAGEMENT’S RESPONSIBILITY FOR ACCOUNTING INFORMATION
5. | The SENDAS’ management is responsible for the bookkeeping of the accounting books and the preparation of the accounting information in accordance with the accounting practices adopted in Brazil and for the adjustments to market prices, as well as for the relevant internal controls deemed necessary for the preparation of such accounting information free and clear from relevant distortion, regardless if caused by fraud or error. The main accounting practices adopted by the Company and determined by management are described in EXHIBIT 2 of the Appraisal Report. |
COVERAGE OF WORK AND LIABILITY OF THE ACCOUNTANT
6. | Our responsibility is to express a conclusion on the value of the SENDAS’ partial net assets as at September 30, 2020, based on the work conducted in conformity with Technical Communication CTG 2002, approved by the Federal Accounting Council (CFC), which provides for the application of procedures in the analysis of the balance sheet for issuance of the Appraisal Report. Therefore, we have executed the appraisal of said SENDAS’ balance sheet in accordance to the Brazilian and the international audit regulations, which require the compliance of ethical requirements by the accountant, as well as ensure that the work is planned and the executed with the purposes of obtaining reasonable assurance that the shareholders’ equity calculated for the preparation of our appraisal report, is free from any material misstatement. |
7. | The issuance of the appraisal report involves the performance of selected procedures for purposes of verification of the amounts included in the Appraisal Report. The procedures selected depend on the |
Free translation |
accountant’s judgment, including the assessment of the risks of material misstatement of the shareholders’ equity, whether due to fraud or error. In the evaluation of risks, we consider the relevant internal controls for preparation and proper presentation of the SENDAS’ balance sheet to determine the most appropriate procedures under the circumstances, however without expressing an opinion on these internal controls. Our work also includes an evaluation of the adequacy of the accounting policies adopted and reasonability of the management’s accounting estimates. We believe that the evidence obtained is sufficient and appropriate to substantiate our conclusion.
SENDAS’ FINANCIAL POSITION
8. | The SENDAS’ financial position as at September 30, 2020, at book value, is reflected in the balance sheet, included in EXHIBIT 1, summarized as follows: |
ASSET | 25.577.683.997,96 |
(-) LIABILITY | 16.030.115.568,47 |
SHAREHOLDER’S EQUITY | 9.547.568.429,49 |
9. | SENDAS keeps its accounting regular, and its operations registered in own book and its balances duly composed and reconciled. |
10. | SENDAS’ accounting procedures are compliant with the accounting practices adopted in Brazil, based on the technical pronouncements issued by the Accounting Pronouncements Committee (CPC) and, therefore, the accounting balances recognize the value of the investments stated at the value of the investees’ equity. EXHIBIT 2 shows the main accounting practices adopted by the management in order to prepare SENDAS’ balance sheet. |
11. | The accounting procedures consider, for purposes of evaluation of the assets and liabilities, that the Company may continue as a going concern. Our evaluation also considered that the Company may continue as a going concern. |
EXTRA-ACCOUNTING ADJUSTMENTS TO REFLECT PRE-SPIN-OFF AGREEMENTS
12. | Before the spin-off, however after the base date of the equity evaluation, SENDAS and CBD agreed the exchange of assets, which shall be considered for purposes of this appraisal. |
13. | SENDAS holds four hundred and thirty-two million, two hundred and fifty-six thousand and six hundred and sixty-eight (432.256.668) common shares of Almacenes Èxito S.A. (Èxito), representing 96,57% of |
Free translation |
Èxito’s capital at the book value of R$ 10.073.960.080,58 (ten billion, seventy-three million, nine hundred and seventy thousand and eighty reais and fifty-eight cents). The book value of this asset, which was currently acquired, is consistent with its respective market price.
14. | Through exchange, SENDAS delivers to CBD 39.205.678 shares of Éxito’s capital stock, representing nine point zero seven nine four three percent (9.07943%) of that company’s capital stock at the fair value of R$914.658.145,29 (nine hundred and fourteen million, six hundred and fifty-eight thousand, one hundred and forty-five reais and twenty-nine cents). |
15. As a contra entry, SENDAS shall receive from CBD the following assets:
Assets | Book value | Fair value |
6.941.378.937 quotas of capital stock of Bellamar Empreendimento e Participações S.A. | 188.558.882,31 | 769.048.145,29 |
Land Feira de Santana | 13.286.435,20 | 15.070.000,00 |
Land Itaperi – Av. dos Expedicionários | 109.377,50 | 13.610.000,00 |
Land Ribeirão Preto – Av. Castelo Branco | 7.000.000,00 | 73.290.000,00 |
Land Americana – Rod. Luiz de Queiroz | 1.947.211,61 | 36.590.000,00 |
Land Campo Grande | 2.450.000,00 | 7.050.000,00 |
213.351.906,62 | 914.658.145,29 |
16. | The shareholding interest held by CBD in Bellamar, stated at book value and market price, is described in EXHIBIT 3, including the respective book value. |
17. | The land exchanged is described in EXHIBIT 4, which includes the Appraisal Reports at Market Value of each land. |
18. | The exchange is performed and demonstrated at fair value. |
19. | Before the spin-off, in addition to the Exchange, CBD agreed to contribute with two capital increases in SENDAS, in December, in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and eighty-seven reais and nine cents (R$684.679.887,09), in order to increase the shareholding interest value. The capital increases are broken down as follows: |
Free translation |
Current accounts asset balances between CBD and Sendas | 140.142.381,00 |
CBD’s properties delivered to SENDAS (Tancredo Neves and Santo Amaro) | 44.537.506,09 |
Cash capital contribution | 500.000.000,00 |
684.679.887,09 |
20. | The real estates received as capital payment are described in EXHIBIT 5. |
21. | In addition, SENDAS and CBD signed an agreement, whereby CBD will indemnify SENDAS in the event of materialization of the provisions for contingencies recorded in its activity liabilities that were transferred to CBD. As a result of this agreement, SENDAS provisioned an account receivable with CBD and the reversal of deferred tax on the liability provision, in the total amount of R$ 163.116.565,25. |
22. | The adjustments related to exchanges and capital increases are described in EXHIBIT 6. |
23. | The EXHIBIT 7 includes the balance sheet as at September 30, 2020, including the adjustments to the SENDAS’ financial position, after such adjustments, is broken down as follows: |
ASSET | 26.236.338.069,30 |
(-) LIABILITY | 15.840.973.187,47 |
SHAREHOLDER’S EQUITY | 10.395.364.881,83 |
24. | SENDAS’ capital stock is divided into three billion, two hundred and sixty-nine million, nine hundred and ninety-two thousand and thirty-four (3.269.992.034) registered common shares, with no par value. SENDAS is the wholly-owned subsidiary of CBD, which holds SENDAS’ total shares. At SENDAS’ shareholders’ meeting, held on October 5, 2020 and rectified on November 10, 2020, the SENDAS’ common shares were grouped and, currently, the capital stock is represented by two hundred and sixty-eight million, three hundred and fifty-one thousand and five hundred and sixty-seven (268.351.567) registered common shares, with no par value. |
SENDAS’ SPIN-OFF
25. | The net asset to be spun off is represented by the assets and liabilities from the transactions in connection with the gas stations, in the amount of twenty million, ninety-nine thousand, nine hundred and eighty-three reais and sixteen cents (R$ 20.099.983,16), and the total remaining shares issued by Éxito and owned by SENDAS, in the amount of nine billion, one hundred forty-nine million, three hundred and one thousand, nine hundred and thirty-five reais and twenty-five cents (R$ 9.159.301.935,29), totaling nine billion, one |
Free translation |
hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents (R$ 9.179.401.918,45), to be merged into CBD.
26. | The financial position, after the spin-off, is described in EXHIBIT 8, broken down as follows: |
ASSET | 17.050.287.019,40 |
(-) LIABILITY | 15.834.324.056,02 |
SHAREHOLDER’S EQUITY | 1.215.962.963,38 |
27. | By virtue of the spin-off, SENDAS’ capital stock remains unchanged, as well as the number of common shares representing SENDAS’ capital stock. |
CONCLUSION
28 | Based on the tests, analyses and inspections, the balance of SENDAS’ net asset, to be merged into CBD, amounts to at least R$ 9,179,401,918.45 (nine billion, one hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents). |
This appraisal report is issued in 7 (seven) copies and it contains 5 (five) sheets and 8 (eight) exhibits, printed in only one side and initialed by the expert who subscribes this report.
São Paulo, November 23, 2020
MAGALHÃES ANDRADE S/S Auditores Independentes CRC2SP000233/O-3 | GUY ALMEIDA ANDRADE Contador CRC1SP116758/O-6 |
Free translation |
SENDAS DISTRIBUIDORA S.A. |
EXHIBIT 1 |
Balance sheet on September 30, 2020 |
Free translation |
SENDAS DISTRIBUIDORA S.A. |
Balance sheet on September 30, 2020 |
Free translation |
EXHIBIT 2 |
SENDAS DISTRIBUIDORA S.A.
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
1. Basis of preparation
The individual financial statements have been prepared according to the Brazilian accounting practices, Law No. 6,404/76, particularly the technical pronouncements and interpretations issued by the Committee of Accounting Pronouncements - CPC, ratified by the Brazilian Securities Commission - CVM.
The financial statements have been prepared based on the historical cost, except for certain financial instruments measured at their fair values. All material information related to the financial statements, and only to them, is being evidenced and corresponds to that used by Management in its management of Sendas’s activities.
2. Foreign-currency transactions
Foreign-currency transactions are initially recognized at the market value of the corresponding currencies on the date in which the transaction qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated into Real, according to the quotation of the respective currencies at the closing of the fiscal years. Differences in the payment or translation of monetary items are recognized in the financial result.
3. Adjustment at present value of assets and liabilities
Long-term assets and liabilities are adjusted at their present value, taking into consideration the contractual cash flows and the respective interest rate, explicit or implicit. Short-term assets and liabilities are not adjusted at present value.
4. Classification of assets and liabilities as current and noncurrent
Assets (except for deferred income and social contribution taxes) with estimated realization or intended for sale or consumption within 12 months, as of the balance sheet dates, are classified as current assets. Liabilities (except for deferred income and social contribution taxes) with estimated settlement within 12 months, as of the balance sheet dates, are classified as current. All the other assets and liabilities (including deferred taxes) are classified as “noncurrent”. Deferred tax assets and liabilities are classified as “noncurrent”, net per legal entity, as set forth in the corresponding accounting pronouncement.
5. Conversion of subsidiaries and associates located in other countries
The financial statements are presented in reais, which is the functional currency. Every entity defines its functional currency and all of their financial transactions are measured in that currency. The financial statements of subsidiaries located in other countries that use a functional currency different from that of the parent company are translated into reais, on the balance sheet date, according to the following criterion:
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | Assets and liabilities, including goodwill and market value adjustments, are translated into reais at the exchange rate in effect on the balance sheet date. |
• | Statement of income and cash flow statement are translated into reais using the average rate, except if there are significant variations, in this case it is used the rate in effect on the date of the transaction. |
• | Shareholders’ equity accounts are maintained at the historical balance in reais and the variation is recorded under the caption of equity adjustments as other comprehensive results. |
The differences of exchange variations are recognized directly in a separate item of the shareholders’ equity. When a foreign operation is sold, the accumulated value of exchange variation adjustment in the shareholders’ equity is recorded in the result for the year.
The effects of the conversion of the investment into a foreign operation are recognized in separate items of the shareholders’ equity and reclassified to the result for the year upon write-off of the investment.
6. | Accounting for shareholding interest at cost derived from corporate restructurings and carried out with related parties |
Sendas accounts for interest derived from corporate restructurings acquired from related parties with no economic essence. The difference between the balance of cost and the value acquired is recorded in the shareholders’ equity, when the transaction is made between companies under common control. The transactions do not qualify as business combination.
7. Adoption of principal accounting judgments, estimates and assumptions
The preparation of the individual and consolidated financial statements of Sendas requires judgments and estimates and adoption of assumptions affecting the amounts of income, expenses, assets and liabilities and the evidence of contingent liabilities in the analysis of the financial statements, however, the uncertainties relating to these assumptions and estimates may produce results that require material adjustments at the book value of assets or liabilities in future years.
In the process of application of Sendas’s accounting policies, it was adopted judgments which had greater effect on values recognized in the individual financial statements regarding:
• Reduction at recoverable value - impairment;
• Inventories: Recognition of provisions for expected losses;
• Recoverable taxes: Expected realization of tax credits;
Fair value of derivatives and other financial Instruments: Measurement of the fair value of derivatives;
• | Provision for lawsuits: Recognition of provision for lawsuits representing expected probable losses estimated on reasonable basis; |
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• Income tax: Recognition of provisions based on reasonable estimates;
• | Stock-based payments: Estimate of the fair value of the operations based on evaluation model; |
• | Business combination: Estimates of the fair value of assets and liabilities acquired in the business combination and resulting goodwill; and |
• | Lease: Definition of the term of the lease agreement and incremental interest rate. |
8. Cash and Cash Equivalents
Comprise cash, bank accounts and short-term investments of high liquidity, immediately convertible into known values of cash and subject to immaterial risk of change of value, with intention and possibility of redemption in up to 90 days from the date of investment.
9. Accounts Receivable
The balances of accounts receivable are recorded initially at the transaction value, which corresponds to the sales value, and are subsequently measured according to the portfolio: (i) at fair value through other comprehensive results (VJORA), for receivables from credit card companies and (ii) at amortized cost, for the other portfolios.
For all the portfolios, estimated losses are taken into consideration and are recognized based on quantitative and qualitative analyses, history of actual losses in the past 24 months, credit rating and considering information on projections of assumptions related to macroeconomic events such as unemployment rate and consumer trust, as well as the volume of past-due credits from the accounts receivable portfolio. Sendas opted to measure provisions for accounts receivable losses for an amount equal to the credit loss expected for the entire life, applying the practical expedient of adopting a matrix of losses for each maturity range.
Provision for losses on financial assets measured at amortized cost is deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
In every date of presentation, Sendas evaluates if the financial assets recorded at amortized cost or VJORA have indications of loss on recoverable value. A financial asset has indication of loss on reduction to recoverable value when there is one or more event with adverse impact on the estimated future cash flows of the financial asset.
The accounts receivable are considered uncollectible and, therefore, written off from the accounts receivable portfolio when the payment is not made after 360 days from the maturity date.
At every annual closing of the balance sheets, Sendas evaluates if the assets or groups of financial assets presented loss on recoverable value.
10. Inventories
Accounted for at cost or net realizable value, whichever is lower. Inventories acquired are recorded at average cost, including storage and handling costs, to the extent they are required
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
to bring the inventories to their sale condition in the stores, less commercial agreements received from suppliers.
The net realizable value is the sale price in the normal course of business, less estimated costs to make the sale, such as: (i) taxes on sale; (ii) personnel expenses directly tied to sales; (iii) cost of goods; and (iv) other costs required to bring the goods to sale condition.
Inventories are reduced to their recoverable value through estimates of losses, breaks, scrapping, slow turnover of goods and estimate of loss for goods that will be sold with negative gross margin, which is periodically analyzed and evaluated for adequacy.
The commercial agreements received from suppliers are measured and recognized based on the contracts and agreements signed, and recorded in the result as the corresponding inventories are sold. They comprise agreements by purchase volume, logistic and specific deals for recovery of margin, reimbursement of expenses, among other, and are recorded as reduction of balances payable to the respective suppliers, when the Company contractually has the right to settle the liabilities with suppliers at the net values receivable under commercial agreements.
11. Recoverable Taxes
The Company records tax credits whenever it has legal, documental and factual opinion on these credits that allow their recognition, including estimate of realization, where the ICMS is recognized as reduction of “cost of goods sold” and the PIS and COFINS as reduction of result accounts on which the credits are calculated.
The realization of these taxes is made based on growth projections, operating issues and generation of debits for use of these credits by the companies of the Group.
12. Investments in controlled companies and associates
12.1. Interest in controlled companies, subsidiaries and associates
The determination of which subsidiaries are controlled by the Company and the procedures for full consolidation follow the concepts and principles established by CPC 36 (R3).
The financial statements of the subsidiaries are prepared on the same date of analysis of the financial statements of the Company, adopting consistent accounting policies.
In the individual financial statements, interest is calculated considering the percentage held by GPA or its subsidiaries.
In the individual financial statements, investments in controlled companies are accounted for under the equity method.
12.2. Accounting information of the associates
Investments in associates are accounted for under the equity method since it is an entity in which the Company exerts significant influence, but not the control, since (a) it is part of the shareholders’ agreement, appointing part of the management and having veto right in certain relevant decisions; and (b) power over operating and financial decisions. The associates are: (i) FIC managed by Itaú Unibanco S.A., (ii) Cnova N.V. which operates
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
mainly in the e-commerce in France; and (iii) Tuya, a finance investee of Éxito. There are no restrictions by the associates on transferring funds to the Company, for example as dividends.
13. Business combination and goodwill
Business combinations are accounted for under the acquisition method. The acquisition cost corresponds to the sum of the amount transferred, measured at fair value on the acquisition date, and the remaining amount of the noncontrolling shareholders’ interest in the acquired company. For every business combination, the buyer measures the noncontrolling shareholders’ interest in the acquired company at fair value or in proportion to the interest held in the identifiable net assets of the acquired company. The acquisition costs incurred are treated as expense and included in administrative expenses.
When the Company acquires a business, it evaluates the assets acquired and the financial liabilities assumed for the proper classification and designation according to the contractual terms, the economic circumstances and conditions on the acquisition date. This includes the separation of embedded derivatives in agreements by the acquired company.
Any contingent payment to be transferred by the buyer will be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent payment considered as asset or liability will be recognized through the result.
The goodwill is initially measured at cost, and the excess between the amount transferred and the amount recognized of noncontrolling shareholders’ interest on the assets acquired and liabilities assumed. If this payment is lower than the fair value of the net assets of the acquired subsidiary, the difference is recognized in the result as gain from advantageous purchase.
After the initial recognition, the goodwill is measured at cost, less non-recoverable losses. For purposes of test of loss on recoverable value, the goodwill acquired in a business combination is, since the acquisition date, allocated to each of the UGCs of the Company which should benefit from the business combination, regardless if other assets or liabilities of the acquired company are attributed to these UGCs.
Where the goodwill is part of an UGC and part of the operation within this unit is sold, the goodwill associated to the operation sold is included in the accounting value of the operation in the calculation of profit or loss on the sale of the operation. This goodwill is measured based on the values related to the operation sold and to the portion of the UGC that was maintained.
14. Properties for Investment
Properties for investment are measured at historical cost (including transaction costs), less accumulated depreciation and/or losses on non-recoverable losses, if any. The cost of properties for investment acquired in a business combination is calculated at fair value, pursuant to IFRS 3/ CPC 15 - Business Combination.
Properties for investment are written off when sold or when they are no longer permanently used and they are not expected to generate any future economic benefit from their sale. A property for investment is also transferred when there is intention to sell it and in this case it is classified as noncurrent assets held for sale. The difference between the net value from this sale and the book value of the asset is recognized in the statement of income for the year upon write-off.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
The properties for investment of the Company and its subsidiaries correspond to commercial areas and lots that are held for generation of income or future price appreciation.
The fair value of properties for investment is measured based on appraisals conducted by third parties.
15. Property, Plant and Equipment
The property, plant and equipment is stated at cost, net of accumulated depreciation and non-recoverable losses, if any. The cost includes the amount of acquisition of equipment and funding costs in connection with loans for long-term construction projects, provided that the recognition criteria are met. When significant items of property, plant and equipment are replaced, these items are recognized as individual assets, with specific useful lives and depreciations. Likewise, when a significant replacement is made, its cost is recognized in the book value of the equipment as replacement, provided that the recognition criteria are met. All the other repair and maintenance costs are recognized in the result for the year as incurred.
Category of assets Annual average depreciation rate | |
Buildings | 2.50% |
Improvements in own and third-party properties | 4.17% |
Machinery and equipment | 12.12% |
Installations | 8.19% |
Furniture and fixtures | 11.03% |
Other | 20.00% |
Property, plant and equipment and any significant parts are written off upon disposal or when they are not expected to generate any future economic benefit from their use or disposal. Any gains or losses resulting from the write-off of the assets are included in the result for the year.
The residual value, useful life of the assets and depreciation methods are reviewed at the closing of every year, and adjusted on prospective basis, when applicable. The Company reviewed the useful life of the property, plant and equipment in the year 2019 and concluded that there are no changes to be made in this fiscal year.
Interest of loans directly attributable to the acquisition, construction or production of an asset, which demands a substantial period of time to be finished for the intended use or sale (eligible asset), is capitalized as part of the cost of the respective assets during the construction phase. As of the date of commencement of operation of the corresponding asset, the capitalized costs are depreciated over the estimated useful life of the asset.
15.1. Reduction at recoverable value of non-financial assets
The impairment test aims to present the actual net realizable value of an asset. The realization can be directly or indirectly, through sale or cash generation in the use of the asset in the Company’s activities.
Every year, the Company conducts the impairment test of its tangible and intangible assets or whenever there is internal or external evidence that the asset can present loss on recoverable value.
The recoverable value of an asset is defined as the highest between its fair value or the
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
value in use of its cash generating unit - UGC, except if the asset does not generate cash inflows that are mostly independent from cash inflows from other assets or groups of assets.
If the book value of an asset or UGC exceeds its recoverable value, the asset is considered not recoverable and a provision is recognized in order to adjust the book value to its recoverable value. In the recoverable value evaluation, the estimated future cash flow is discounted to present value, adopting a discount rate, which represents the capital cost of the Company (WACC) which reflects current market evaluations in connection with the value of money over time and the specific risks of the asset.
16. Intangible Assets
Intangible assets acquired separately are measured at cost upon initial recognition, less amortization and non-recoverable losses, if any.
Internally generated intangible assets, excluding capitalized costs of development of software, are reflected in the result for the year in which they were incurred. Intangible assets comprise mainly software acquired from third parties, software developed for internal use, goodwill (right of use of stores), list of clients, advantageous lease agreements, advantageous agreements for supply of furniture and brands.
Intangible assets with definite useful life are amortized under the straight-line method. The period and amortization method are reviewed, at least, at the closing of the fiscal year. Changes in the estimated useful life or in the estimated standard use of the future economic benefits incorporated into the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting assumptions.
The costs of development of software recognized as asset are amortized over its definite useful life (5 to 10 years), whose amortization rate is 10.82%, and the amortization begins when the asset is put into operation.
Intangible assets with indefinite useful life are not amortized, but submitted to impairment tests at the closing of the fiscal year or whenever there is indication that their book value cannot be recovered, individually or at the level of the UGC. The evaluation is reviewed on annual basis to determine if the indefinite useful life remains valid. Otherwise, the useful life estimate is changed on prospective basis from indefinite to definite.
Gain or losses, when applicable, resulting from the derecognition of an intangible asset, are measured as the difference between net results from the disposal and the book value of the asset, being recognized in the result for the year upon write-off of the asset.
17. Financial Instruments
Financial assets are recognized when the Company assumes contractual rights to receive cash or other financial assets from contracts in which it is a party. Financial assets are derecognized when the rights to receive cash tied to financial assets expire or when the risks and benefits are substantially transferred to third parties. Assets and liabilities are recognized when rights or obligations are retained in the transfer by the Company.
Financial liabilities are recognized when the Company assumes contractual obligations for settlement in cash or assumes third-party obligations through a contract in which it is a party. Financial liabilities are derecognized when they are settled, extinguished or expired.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Purchases or sales of financial assets requiring delivery of assets within a term defined by regulation or convention in the market (negotiations under normal conditions)
are recognized on the negotiation date, that is, on the date in which the Company agrees to purchase or sell the asset.
17.1. Classification and measurement of financial assets and liabilities
Upon initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other results (“VJORA”) – or fair value through the result (“VJR”). The classification of financial assets is usually based on the business model where a financial asset is managed and has characteristics of contractual cash flows. Embedded derivatives in which the principal contract is a financial asset within the scope of the standard are never separated. In turn, the hybrid financial instrument is evaluated for classification as a whole.
A financial asset is measured at amortized cost if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is to maintain financial assets to receive contractual cash flows; and |
• | its contractual terms generate, on specific dates, cash flows related to the payment of principal and interest on the outstanding principal. |
A debt instrument is measured at VJORA if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is attained by the receiving of contractual cash flows as well as by the sale of financial assets; and |
• | its contractual terms generate, on specific dates, cash flows that are only payments of principal and interest on the outstanding principal. |
Upon initial recognition of an investment in equity instrument that is not held for trading, the Company may opt to irrevocably present subsequent changes in the fair value of investment in other Comprehensive Results (“ORA”). This option is made on investment by investment basis.
All financial assets not classified as measured at amortized cost or VJORA, as described above, are classified as VJR. This includes all derivative financial assets. Upon initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost, VJORA or VJR if this significantly eliminates or reduces an accounting mismatch which would otherwise arise (fair value option).
A financial asset (except for trade account receivable without a material financing component that is initially measured at the transaction price) is initially measured at fair value, plus, for an item not measured at VJR, transaction costs directly attributable to acquisition.
Financial assets measured at VJR - These assets are subsequently measured at fair value. The net result, including interest or income from dividends, is recognized in the result.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Financial assets at amortized cost - These assets are subsequently measured at amortized cost under the effective interest method. The amortized cost is reduced by losses on reduction to recoverable value. Interest income, and exchange gains and losses are recognized in the result. Any gain or loss on derecognition is recognized in the result.
Financial assets at VJORA - These assets are subsequently measured at fair value. Interest income is calculated under the effective interest method, exchange gains and losses and losses on reduction to recoverable value are recognized in the result. Other net results are recognized in ORA. Upon derecognition, the accumulated result in ORA is reclassified to the result.
17.2. Derecognition of financial assets and liabilities
A financial asset (or, as appropriate, part of a financial asset or part of a group of similar financial assets) is derecognized when:
• The rights to receive cash flows expire.
• | The Company transfers its rights to receive cash flows from the asset or the commitment to fully pay cash flows received to a third party, according to an onlending agreement; and (a) the Company has substantially transferred all the risks and benefits related to the asset; or (b) the Company did not transfer neither substantially retain all the risks and benefits related to the asset, but transferred its control. |
When the Company assigns its rights to receive cash flows from an asset or enters into onlending agreement, without having transferred or retained substantially all the risks and benefits related to the asset neither transferred the control of the asset, the asset is held and a corresponding liability is recognized. The transferred asset and the corresponding liability are measured in a way to reflect the rights and obligations retained by the Company.
A financial liability is derecognized when the underlying obligation is settled, cancelled or expired.
When a current financial liability is replaced by another from the same creditor, under substantially different terms, or when the terms of a current liability are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference between the respective book values is recognized in the result for the year.
17.3. Offsetting of financial Instruments
Financial assets and liabilities are offset and stated net in the financial statements, if, and only if, there is the right to offset values recognized and intention to settle on net basis or to realize the assets and settle the liabilities simultaneously.
18. Derivative Financial Instruments
The Company uses derivative financial instruments to put a limit on the exposure to the variation not related to the local market such as swaps of interest rates and swaps of exchange variation. These derivative financial instruments are initially recognized at fair value on the date in which the derivative contract is entered into and later remeasured at fair value at the closing of the fiscal years. The derivatives are recorded as financial assets when the fair value
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
is positive and as financial liabilities when negative. Gains or losses resulting from changes in the fair value of derivatives are recorded directly in the result for the year.
At the beginning of the hedge relation, the Company formally designates and documents the hedge relation to which it intends to apply hedge accounting, and its purpose and risk management strategy to contract it. The documentation includes identification of the hedge instrument, the item or operation covered by hedge, the nature of the hedged risk and how the Company should evaluate the efficiency of the changes in the fair value of the hedge instrument on the neutralization of the exposure to changes in the fair value of the item covered by hedge or the cash flow attributable to the hedged risk. These hedges are expected to be highly efficient on the neutralization of changes in fair value or cash flow, and are constantly evaluated to determine if they are actually being highly efficient over all the fiscal years of the financial reports to which they have been designated.
They are recorded as fair value hedges, following the procedures below:
• | The change in the fair value of a derivative financial instrument classified as fair value hedge is recognized as financial result. The change in the fair value of the hedged item is recorded as part of the book value of the hedged item, and is recognized in the statement of income for the year. |
• | Upon calculation of fair value, debts and swaps are measured at rates disclosed in the financial market and projected until their maturity date. The discount rate used for calculation under the method of interpolation of foreign currency loans is obtained through DDI curves, clean Coupon and DI, indexes disclosed by B3 and, for local currency loans it is used the DI curve, index disclosed by CETIP and calculated under the exponential interpolation method. |
The Company uses financial instruments only for protection against identified risks limited to 100% of the value of these risks. Operations with derivatives are solely used to reduce exposure to foreign currency and interest rate fluctuation, so as to maintain the stability of the capital structure.
19. Cash flow hedge
Derivative instruments are recorded as cash flow hedge, following the procedures below:
• | The efficient portion of gain or loss of the hedge instrument is recognized directly in the shareholders’ equity under Other Comprehensive Results, and if the hedge fails to meet the hedge ratio, but the risk management purpose remains unchanged, the Company should adjust (“rebalance”) the hedge ratio to meet the qualification criteria. |
• | Any remaining gain or loss in the hedge instrument (including from the “rebalance” of the hedge ratio) is an inefficiency and, therefore, should be recognized in the result. |
• | The values recorded under Other Comprehensive Results are immediately transferred to the statement of income together with the transaction object of hedge when affecting the result, for example, when a financial income or expense object of hedge is recognized or when an expected sale occurs. When the item object of hedge is the cost of a non-financial asset or liability, the values recorded in the shareholders’ equity are transferred to the initial book value of the non-financial asset or liability. |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | The Company should discontinue the hedge accounting on prospective basis only when the hedge relation fails to meet the qualification criteria (after taking into consideration any rebalance of the hedge relation). |
• | If the occurrence of the estimated transaction or firm commitment is no longer expected, the values previously recognized in the shareholders’ equity are transferred to the statement of income. If the hedge instrument expires or is sold, discontinued or exercised without replacement or rollover, or if its classification as hedge is cancelled, the gains or losses previously recognized in the comprehensive result remain deferred in the shareholders’ equity under Other Comprehensive Results until the expected transaction or firm commitment affects the result. |
20. Loss on recoverable value of financial assets
The Company adopts the expected credit loss model, which applies to financial assets measured at amortized cost, contractual assets and debt instruments measured at VJORA, but which does not apply to investments in equity instruments (shares) or financial assets measured at VJR.
Provisions for losses are measured at one of the following bases:
• | Credit losses expected for 12 months (general model): these credit losses result from possible events of default within 12 months from the balance sheet date, and subsequently, in case of deterioration of the credit risk, for the entire life of the instrument |
• | Credit losses expected for the entire life (simplified model): these credit losses result from all possible events of default over the expected life of a financial instrument |
• | Practical expedient: these credit losses are expected and consistent with reasonable and sustainable information available on the balance sheet date for past events, current conditions and forecast of future economic conditions, which allow to check future probable loss based on the historical loss occurred according to the maturity of the securities. |
The Company measures provisions for losses on accounts receivable and other receivables and contractual assets for a value equal to expected credit loss for the entire life, where for trade accounts receivable, whose portfolio of receivables is dispersed, leases receivable, wholesale accounts receivable and accounts receivable from carriers, it is applied the practical expedient through adoption of a matrix of losses for each maturity range.
When determining if the credit risk of a financial asset has significantly increased since the initial recognition and when estimating the expected credit losses, the Company considers reasonable and sustainable information that is relevant and available without excessive cost or effort. It includes information and quantitative and qualitative analyses, based on the historical experience of the Company, credit evaluation and considering information on projections.
The Company assumes that the credit risk of a financial asset has significantly increased if it is more than 90 days past due. The Company considers a financial asset as default when:
• | it is unlikely that the debtor will fully pay its credit obligations to the Company without resorting to actions such as realization of guarantee (if any); or |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• the financial asset is past due for more than 90 days.
The Company determines the credit risk of a debt security based on analysis of the history of payments, current financial and macroeconomic conditions of the counterparty and evaluation of rating agencies when applicable, thus assessing each security individually.
The maximum period considered in the estimate of expected credit loss is the contractual period during which the Company is exposed to the credit risk.
Measurement of expected credit losses – Expected credit losses are estimates weighted by the probability of credit losses based historical losses and projections of related assumptions. Credit losses are measured at present value based on all cash shortages (that is, the difference between cash flows payable to the Company according to agreement and cash flows that the Company expects to receive).
Expected credit losses are discounted at the effective interest rate of the financial asset.
Financial assets with credit recovery issues – On each presentation date, the Company assesses if the financial assets stated at amortized cost and the debt securities measured at VJORA present indications of loss on recoverable value. A financial asset presents indications of loss on recoverable value when there is one or more events with negative impact on the estimated future cash flows of the financial asset.
Presentation of loss on reduction to recoverable value - Provision for losses for financial assets measured at amortized cost are deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
Losses on reduction to recoverable value related to trade accounts receivable and other receivables, including contractual assets, are presented separately in the statement of income and ORA. Losses of recoverable values of other financial assets are presented in ‘selling expenses’.
Accounts receivable and contractual assets - The Company considers the model and certain assumptions adopted in the calculation of these expected credit losses as the principal sources of uncertainty of the estimate.
The positions in each group were segmented based on usual characteristics of credit risk, such as:
• | Level of credit risk and history of losses – for wholesale clients and lease of properties; and |
• | Default status, risk of default and history of losses - for credit card companies and other clients. |
21. Provision for lawsuits
The provisions are recognized when the Company has a present obligation (legal or not formalized) in view of a past event, it is probable that cash outflow will be required to settle the obligation, and it is possible to make a reliable estimate of the value of this obligation. Expenses related to the provision are recorded in the result for the year, net of reimbursement. For success fees, the Company and its subsidiaries recognize a provision when the fees are
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
incurred, that is, upon final judgment of the lawsuits, being disclosed in the notes, the amounts involved in the lawsuits not yet concluded.
The assessment of the chance of loss includes analysis of available evidences, hierarchy of the laws, available case laws, the most recent court decisions, legal relevance, the history of occurrence and amounts involved and external lawyers’ opinion.
The provision for lawsuits is estimated by the Company and corroborated by its legal advisors and it was recognized in an amount considered sufficient to cover probable losses.
22. Commercial lease operations
Upon signing of contract, the Company assesses if it is, or contains, a lease. The contract is, or contains, a lease when it transfers the right of control over the use of an identified asset for a given period in exchange for payment.
The Company leases equipment and commercial spaces, including stores and distribution centers, under cancellable and non-cancellable commercial lease. The terms of the contracts range substantially from 5 to 25 years.
The Company as lessee
The Company assesses its lease contracts in order to identify relations of lease of a right of use, using exemptions provided for contracts under 12 months and where the individual amount of the asset is below US$ 5,000 (five thousand dollars). The contracts are then recorded, upon beginning of the lease, as Lease Liabilities against the Right of Use, both at the present value of minimum lease payments, using the implicit interest rate of the contract, if it can be used, or incremental interest rate considering loans obtained by the Company.
The lease term used in the measurement corresponds to the term that the lessee is reasonably certain to exercise the option to extend the lease or not to exercise the option to rescind the lease.
Subsequently, payments made are segregated between financial charges and reduction of lease liabilities, in order to obtain a constant interest rate on the balance of liabilities. The financial charges are recognized as financial expense for the period.
The right of use assets under lease contracts are amortized over the lease term. The capitalization of improvements, renewals and renovations in stores are amortized over their estimated useful life or over the expected term of use of the asset, unless there is evidence that the lease contract will not be extended.
Variable rents are recognized as expenses in the years in which they are incurred.
The Company as lessor
Commercial leases in which the Company does not transfer substantially all the risks and benefits from the ownership of the asset are classified as operating commercial leases. The initial direct trading costs of commercial leases are added to the book value of the leased asset and recognized over the term of the contract, on the same base of rent income.
Free translation |
Variable rents are recognized as revenue in the fiscal years in which they are earned.
23. Revenues to be accrued
Unearned revenues are recorded by the Company as liability for the anticipation of amounts received from commercial partners for the exclusivity in the provision of intermediation services for complementary or extended guarantees and values referring to the rental of gondola ends and backlight panels for displaying suppliers' products, and are recognized on the result for the year upon proof of service regarding the sale of these guarantees to business partners.
Free translation |
EXHIBIT 3 |
SENDAS DISTRIBUIDORA S.A.
Value of the investment and Bellamar Empreendimentos e Participações Ltda.
FINANCEIRA ITAÚ CBD S/A CRÉDITO. FINANCIAMENTO E INVESTIMENTO
Shareholders | Ordinary shares | % | Market Value | |||
Itau Unibanco | 453,683,262 | 50% | 2,150,404,150.48 | |||
Bellamar Empreend. e Partic. Ltda | 324,501,114 | 35.7630% | 1,538,096,290.58 | |||
Lake Niassa Empreend. e Partic. Ltda. | 129,182,147 | 14.2370% | 612,307,855.16 | |||
Companhia Brasileira de Distribuição | 1 | 0.0000% | 4.74 | |||
Conselho | 8 | 0.0000% | 37.92 | |||
907,366,532 |
100,0000% |
4,300,808,338.88 |
The shares of Financeira Itaú CBD S.A. were valued independently and the appraisers
establish the value of the company's shares in a space of R$ 4.69 to R$ 4.93 per share.
In this evaluation, an average value of R$ 4.7399 was adopted.
Accordingly, the market value of Financeira Itaú CBD S.A. is R$ 4,300,808,338.88.
The market value of Bellamar's investment in FIC considering its participation and, as
shown above, is R$ 1,538,096,290.58.
BELLAMAR EMPREENDIMENTOS E PARTICIPAÇÕES LTDA
Quotaholders | Ordinary shares | % | Equity value | Market Value | ||||
Companhia Brasileira de Distribuição | 13,882,756,895 | 99.999% | 377,117,939.44 | 1,538,096,179.79 | ||||
Sendas Distribuidora S.A. | 1,000 | 0.0001% | 27.16 | 110.79 | ||||
13,882,757,895 |
100,0000% |
4,300,808,338.88 |
1,538,096,290.58 |
Consequently, the value of the CBD investment in Bellamar follows the same logic, with an amount of R$1,538,096,179.79.
In the barter, CBD delivers to SENDAS 50% (fifty percent) of the shares of Bellamar Empreendimentos e Participações S.A., for a market value of R$ 769,048,145.29.
Free translation |
EXHIBIT 4 |
SENDAS DISTRIBUIDORA S.A. |
Description of the properties to be delivered in the Barter |
APPRAISAL REPORTS AT MARKET VALUE AND DESCRIPTION OF THE PROPERTIES
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 5 |
SENDAS DISTRIBUIDORA S.A. |
Description of the real estate property located at Av. Tancredo Neves |
DESCRIPTION OF PROPERTIES TO BE DELIVERED FOR CAPITAL CONTRIBUTION
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 6 |
SENDAS DISTRIBUIDORA S.A.
Adjustments related to barters between CBD and Sendas
(amount in reais)
An agreed condition to make the spin-off and merger feasible is the exchange of assets and the increase in capital of CBD in SENDAS. As a result of the exchange, the need arises to make certain adjustments, as listed below. The balance sheet which serves as the basis for the assessment needs to reflect these exchange and capital increases in order to include the impacts on equity resulting from them.
Order | Accounts | Debit | Credit |
1 | Investments (Bellamar - exchange) Fixed assets (Lands) Investments Éxito | 769,048,145.29 145,610,000.00 | 914,658,145.29 |
By barter, CBD delivers to Sendas part of the shares it owns in Bellamar, plus 6 lands and receives from Sendas part of the shares that Sendas holds in Éxito | |||
2 | Cash and cash equivalents Current account liability balance with CBD Fixed assets - properties Capital stock Capital reserve | 500,000,000.00 140,142,381.00 44,537,506.09
|
684,679,830.10 56.99 |
Capital increase to be carried out in December / 20, with surplus to capital reserve | |||
3 | Asset – Credit with CBD Retained Earnings | 114,116,565.25 | 114,116,565.25 |
Provision for credits arising from the refunding agreement for passive contingencies in Sendas that become materialized | |||
4 | Liability - Deferred IR and CSLL Retained Earnings | 49,000,000.00
| 49,000,000.00 |
Reversal of Deferred IR and CSLL |
Free translation |
EXHIBIT 7 |
SENDAS DISTRIBUIDORA S.A.
Balance sheet after adjustments for spin-off
(amount in reais)
Balance on September 30, 2020 | Commitment to the Spin-off | Balance after adjustment to spin-off | ||||
nº | Debit | Nº | Credit | |||
ASSETS | ||||||
Current | ||||||
Cash and Cash Equivalents | 2,289,782,982.42 | 2 | 500,000,000.00 | 2,789,782,982.42 | ||
Receivable accounts | 221,430,077.77 | 221,430,077.77 | ||||
Inventories | 3,312,953,305.29 | 3,312,953,305.29 | ||||
Recoverable taxes | 580,344,674.91 | 580,344,674.91 | ||||
Prepaid expenses | 31,166,295.18 | 31,166,295.18 | ||||
Non current assets for sale | - | - | ||||
Receivable Dividends | - | - | ||||
Other | 13,326,703.92 | 13,326,703.92 | ||||
Derivative Financial Instruments - Foreign Currency | 79,749,557.53 | 79,749,557.53 | ||||
Total current asset | 6,528,753,597.02 | 7,028,753,597.02 | ||||
Non-current | ||||||
Long term receivable | ||||||
Receivable accounts | - | - | ||||
Deferred Income Tax and Social Contribution | - | - | ||||
Prepaid expenses | 1,000,000.00 | 1,000,000.00 | ||||
Credits with Related Parties | 22,941,213.66 | 3 | 114,116,565.25 | 37,057,778.91 | ||
Recoverable Taxes | 867,732,072.45 | 867,732,072.45 | ||||
Deposits for Judicial Appeal | 112,071,529.61 | 112,071,529.61 | ||||
Financial Instruments - Fair value hedge | 10,843,333.82 | 10,843,333.82 | ||||
Total Long-term receivables | 1,014,588,149.54 | 1,128,704,714.79 | ||||
Investments | 10,073,960,080.58 | 1 | 769,048,145.29 | 1 | 914.658.145,29 | 9,928,350,080.58 |
Fixed assets | 6,923,737,185.73 | 1.2 | 190,147,506.09 | 7,113,884,691.82 | ||
Intangible asset | 1,036,644,985.09 | 1,036,644,985.09 | ||||
Total – non-current assets | 19,048,930,400.94 | 19,207,584,472.28 | ||||
TOTAL ASSETS | 25,577,683,997.96 | 26,236,338,069.30 |
Free translation |
|
SENDAS DISTRIBUIDORA S.A.
Balance sheet after adjustments for spin-off
Free translation |
EXHIBIT 8 |
SENDAS DISTRIBUIDOR A S.A.
Balance sheet after adjustments for spin-off
(amount in reais)
Free translation |
|
SENDAS DISTRIBUIDOR A S.A.
Balance sheet after adjustments for spin-off
Free translation |
Exhibit 4.2
SENDAS’ Base Balance Sheet
[Page intentionally left in blank]
Free translation |
SENDAS DISTRIBUIDORA S.A. |
Balance sheet on September 30, 2020 |
Free translation |
SENDAS DISTRIBUIDORA S.A. |
Balance sheet on September 30, 2020 |
Free translation |
Exhibit 5.2(ii)
CBD’s Appraisal Report
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Appraisal report at book value on the net assets for purposes of spin-off with merger |
November 24, 2020 | 1 00 0035/20 |
Free translation |
Dear Shareholders of
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO e de
SENDAS DISTRIBUIDORA S.A.
MAGALHÃES ANDRADE S/S AUDITORES INDEPENDENTES, audit and consulting firm, enrolled with the Regional Accounting Council of the State of are Paulo under number 2SP000233/O-3, registered with the National Registry of Legal Entities under number 62.657.242/0001-00 and located at Av. Brigadeiro Faria Lima, 1893 – 6th floor, Jardim Paulistano, São Paulo, Capital, appointed by you as expert to carry out the appraisal of the net assets at fair value of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, for purposes of partial spin-off with merger into the equity of SENDAS DISTRIBUIDORA S.A, fulfilled the diligences and verifications required for the performance of its work, presents this instrument
APPRAISAL REPORT
which is subscribed.
São Paulo, November 24, 2020
MAGALHÃES ANDRADE S/S
Auditores Independentes
CRC2SP000233/O-3
GUY ALMEIDA ANDRADE
Accountant CRC1SP116758/O-6
APPRAISAL REPORT
INTRODUCTION
1. | The purpose of this spin-off and merger transaction is to separate certain assets of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (CBD), which assets shall be delivered to its shareholders, as part of the corporate reorganization in the Group, to fully develop the potential cash & carry business developed by SENDAS DISTRIBUIDORA S.A. (SENDAS), from the traditional retail business to be developed by CBD and its subsidiaries, for purposes of independent operation, with separate management and focused on the respective business models and market opportunities. In addition, by virtue of the CBD’s Spin-off, each business shall have direct access to the capital market and other financing sources, to focus on the investment needs according to the profile of each company, creating, therefore, more value to the respective shareholders. |
2. | Therefore, the present Report has the purpose of determining the book value of the net assets to be spun-off and merged, taking into account the financial position of CBD at September 30, 2020. |
3. | Accordingly, we analyzed the CBD’s balance sheet on the base appraisal date. |
MANAGEMENT’S RESPONSIBILITY FOR ACCOUNTING INFORMATION
Free translation |
4. | The CBD’s management is responsible for the bookkeeping of the accounting books and the preparation of the accounting information in accordance with the accounting practices adopted in Brazil and for the adjustments to market prices, as well as for the relevant internal controls deemed necessary for the preparation of such accounting information free and clear from relevant distortion, regardless if caused by fraud or error. The main accounting practices adopted by the Company and determined by management are described in EXHIBIT 2 of the Appraisal Report. |
COVERAGE OF WORK AND LIABILITY OF THE ACCOUNTANT
5. | Our responsibility is to express a conclusion on the value of the CBD’s partial net assets as at September 30, 2020, based on the work conducted in conformity with Technical Communication CTG 2002, approved by the Federal Accounting Council (CFC), which provides for the application of procedures in the analysis of the balance sheet for issuance of the Appraisal Report. Therefore, we have executed the appraisal of said CBD’s balance sheet in accordance to the Brazilian and the international audit regulations, which require the compliance of ethical requirements by the accountant, as well as ensure that the work is planned and the executed with the purposes of obtaining reasonable assurance that the shareholders’ equity calculated for the preparation of our appraisal report, is free from any material misstatement. |
6. | The issuance of the appraisal report involves the performance of selected procedures for purposes of verification of the amounts included in the Appraisal Report. The procedures selected depend on the accountant’s judgment, including the assessment of the risks of material misstatement of the shareholders’ equity, whether due to fraud or error. In the evaluation of risks, we consider the relevant internal controls for preparation and proper presentation of the CBD’s balance sheet to determine the most appropriate procedures under the circumstances, however without expressing an opinion on these internal controls. Our work also includes an evaluation of the adequacy of the accounting policies adopted and reasonability of the management’s accounting estimates. We believe that the evidence obtained is sufficient and appropriate to substantiate our conclusion. |
CBD’S FINANCIAL POSITION
7. | The CBD’s financial position as at September 30, 2020, at book value, is reflected in the balance sheet, included in EXHIBIT 1, summarized as follows: |
ASSET | 33.150.111.359,18 | |
(-) LIABILITY | 20.058.061.757,91 | |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
8. | CBD keeps its accounting regular, and its operations registered in own book and its balances duly composed and reconciled. |
9. | CBD’s accounting procedures are compliant with the accounting practices adopted in Brazil, based on the technical pronouncements issued by the Accounting Pronouncements Committee (CPC) and, therefore, the accounting balances recognize the value of the investments stated at the value of the investees’ equity. EXHIBIT 2 shows the main accounting practices adopted by the management in order to prepare CBD’s balance sheet. |
Free translation |
10. | The accounting procedures consider, for purposes of evaluation of the assets and liabilities, that the Company may continue as a going concern. Our evaluation also considered that the Company may continue as a going concern. |
11. | The evaluation of the CBD’s assets to be spun off and transferred to its shareholders was carried out based on the book value, as set forth in article 226 of Law 6.404/76. |
EXTRA-ACCOUNTING ADJUSTMENTS TO REFLECT PRE-SPIN-OFF AGREEMENTS
12. | Before the spin-off, however after the base date of the equity evaluation, SENDAS and CBD agreed the barter, which shall be considered for purposes of this appraisal. |
13. | SENDAS holds 432.256.668 common shares of Almacenes Éxito S.A. (Éxito), representing 96,57% of Éxito’s capital at the book value of R$10.073.960.080,58 (ten billion, seventy-three million, nine hundred and seventy thousand and eighty reais and fifty-eight cents). The book value of this asset, which was currently acquired, is consistent with its respective market price. |
14. | As a contra entry to the barter, SENDAS shall deliver to CBD thirty-nine million, two hundred and forty-six thousand and twelve (39.246.012) shares of Éxito’s capital stock, representing 9,0793307% of the shares held, corresponding to 8,77% of the Éxito’s total common shares, at fair and book value of R$914.658.145,29. The evaluation is described in EXHIBIT 3. |
15. | As a contra entry, CBD shall deliver to SENDAS the following assets: |
Assets. | Book value | Fair value |
6.941.378.937 quotas of capital stock of Bellamar Empreendimento e Interests S.A. | 188.558.882,31 | 769.048.145,29 |
Land Feira de Santana | 13.286.435,20 | 15.070.000,00 |
Land Itaperi – Av. dos Expedicionários | 109.377,50 | 13.610.000,00 |
Land Ribeirão Preto – Av. Castelo Branco | 7.000.000,00 | 73.290.000,00 |
Land Americana – Rod. Luiz de Queiroz | 1.947.211,61 | 36.590.000,00 |
Land Campo Grande | 2.450.000,00 | 7.050.000,00 |
213.351.906,62 | 914.658.145,29 |
16. | The shareholding interest held by CBD in Bellamar, stated at book value and market price, is described in EXHIBIT 4. |
17. | The land exchanged is described in EXHIBIT 5, which includes the Appraisal Reports at Market Value of each land. |
18. | The barter is performed at fair value however recorded at book value, including the respective equity adjustments. |
19. | Before the spin-off, in addition to the barter, CBD agreed to contribute with two capital increases in SENDAS, in December, in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and eighty-seven reais and nine cents (R$684,679,887.09), in order to increase the shareholding interest value. The capital increases are broken down as follows: |
Current accounts asset balances between CBD and Sendas | 140.142.381,00 |
CBD’s properties delivered to SENDAS (Tancredo Neves and Santo Amaro) | 44.537.506,09 |
Cash capital contribution | 500.000.000,00 |
Free translation |
684.679.887,09 |
20. | Tancredo Neves and Santo Amaro assets are described in EXHIBIT 6. |
21. | The adjustments related to exchanges and capital increases are described in EXHIBIT 7. |
22. | The EXHIBIT 8 includes the balance sheet as at September 30, 2020, including adjustments. The CBD’s financial position, after such adjustments, is broken down as follows: |
ASSET | 33.150.111.359,18 |
(-) LIABILITY | 20.058.061.757,91 |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
SENDAS’ SPUN OFF PORTION MERGER
23. | Subsequently, as of the same date, SENDAS carried out the spin-off, whereby CBD shall merger three hundred and ninety-three million, ten thousand and six hundred and fifty-six (393,010,656) shares of the Éxito’s capital stock, at the fair value and book value of nine billion, one hundred fifty-nine million, three hundred and one thousand, nine hundred and thirty-five reais and twenty-nine cents (R$9,159,301,935.29), as described in EXHIBIT 3. |
24. | SENDAS’ spun-off net assets shall be merged into CBD, in the amount of twenty million, ninety-nine thousand, nine hundred and eighty-three reais and sixteen cents (R$20,099,983.16), in connection with the transaction involving the gas stations, as described in EXHIBIT 9. |
25. | Therefore, the CBD’s balance sheet, used as the base date of this spin-off, shall consider the merger in order to adjust the spun-off net asset. |
26. | By virtue of the SENDAS’ spin-off, CBD shall merger the net asset in the amount of nine billion, one hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents (R$9.179.401.918,45), relating to the investment in Éxito and the transaction involving the gas stations. |
27. | The adjustments for purposes of recognition of the merger of the investment in Éxito, in connection with SENDAS’ spun-off assets, are described in EXHIBIT 10, which also includes the CBD’s balance sheet after such merger, which financial position, used as the base date of this spin-off, is broken down as follows: |
ASSET | 33.156.760.490,63 |
(-) LIABILITY | 20.064.710.889,36 |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
CBD’S SPIN-OFF
28. | By virtue of the barter at fair value, CBD excluded the internal goodwill arising from the transaction, in the amount of R$701.306.238,67. |
29. | Subject to approval of the spin-off, CBD shall recognize the investment in Bellamar at fair value, as CBD shall no longer control Bellamar. Such adjustment shall total R$580.489.262,99, net of deferred income tax and social contribution of R$145.122.315,75, totaling R$435.366.947,24. |
Free translation |
30. | CBD and SENDAS entered into an agreement, whereby CBD shall indemnify SENDAS in the event of occurrence of the contingencies recorded in liabilities by virtue of the activities transferred to CBD. In connection with this agreement, CBD recognized liabilities with SENDAS. Due to the income tax rate differences, CBD reduced the provision in the amount of R$15.561.349,81. |
31. | The CBD’s spun-off net asset is described in EXHIBIT 11 and refers to three billion, two hundred and twenty-seven million, nine hundred and ninety-four thousand and nine hundred and thirty-four (3,227,994,934) shares, representing SENDAS’ total capital stock, stated at equity value, after the barters, capital increase and spin-off, in the amount of one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38). The Shareholders’ Meetings of both companies shall approve the abovementioned spin-offs and merger. After the capital increases referred to in paragraph 19 above, the grouping of the SENDAS’ shares shall be approved, reflecting the same number of shares representing the CBD’s capital stock, that is, 268,351,567 shares. These SENDAS’ shares shall be delivered to the CBD’s shareholders, in the proportion of one share by one share of the capital stock. |
32. | On September 30, 2020 The CBD’s capital stock was divided into two hundred and sixty-eight million, three hundred and thirty-six thousand and two hundred and twenty-six (268,336,226) registered common shares, with no par value. On October 20, 2020 CBD’s capital stock was increased with the issuance of fifteen thousand, three hundred and forty-one (15.341) common shares being now represented by two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value, as described in EXHIBIT 13. |
33. | Once the spin-off shall reduce the CBD’s capital stock however not representing the exclusion or cancellation of the shares, the equity and unit value of the CBD’s shares shall be reduced, without any impact in the shareholding interest held by each shareholder. |
34. | The CBD’s financial position, after the adjustments and the spin-off, is described in EXHIBIT 12, broken down as follows: |
ASSET | 33.222.593.028,91 |
(-) LIABILITY | 20.225.394.554,92 |
SHAREHOLDER’S EQUITY | 12.997.198.473,99 |
35. | Due to the spin-off, the CBD’s shareholders’ equity is reduced to twelve billion, nine hundred and ninety-seven million, one hundred and ninety-eight thousand, four hundred and seventy-three reais and ninety-nine cents (R$12,997,198,473.99), with proportional effects in each account in shareholders’ equity. |
36. | The capital stock is reduced to five billion, six hundred and forty-nine million, two hundred and fifty-seven thousand, one hundred and seventy-six reais and sixty-four cents (R$5,649,257,176.64), which number of shares shall remain unchanged, as described in EXHIBIT 13. |
CONCLUSION
37. | Based on the tests, analyses and inspections, the shares representing the capital stock of SENDAS and owned by CBD, to be delivered to its shareholders, amount to at least one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38). |
Free translation |
This REPORT is issued in 7 (seven) copies and it contains 6 (six) sheets and 13 (thirteen) exhibits, printed in only one side and initialed by the expert who subscribes this report
São Paulo, November 24, 2020
MAGALHÃES ANDRADE S/S Auditores Independentes CRC2SP000233/O-3 | GUY ALMEIDA ANDRADE Contador CRC1SP116758/O-6 |
Free translation |
Exhibit 1
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
EXHIBIT 2 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Principal accounting practices adopted |
in the preparation of the Balance Sheet on September 30, 2020 |
1. Basis of preparation
The individual financial statements have been prepared according to the Brazilian accounting practices, Law No. 6,404/76, particularly the technical pronouncements and interpretations issued by the Committee of Accounting Pronouncements - CPC, ratified by the Brazilian Securities Commission - CVM.
The financial statements have been prepared based on the historical cost, except for certain financial instruments measured at their fair values. All material information related to the financial statements, and only to them, is being evidenced and corresponds to that used by Management in its management of CBD’s activities.
2. Foreign-currency transactions
Foreign-currency transactions are initially recognized at the market value of the corresponding currencies on the date in which the transaction qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated into Real, according to the quotation of the respective currencies at the closing of the fiscal years. Differences in the payment or translation of monetary items are recognized in the financial result.
3. Adjustment at present value of assets and liabilities
Long-term assets and liabilities are adjusted at their present value, taking into consideration the contractual cash flows and the respective interest rate, explicit or implicit. Short-term assets and liabilities are not adjusted at present value.
4. Classification of assets and liabilities as current and noncurrent
Assets (except for deferred income and social contribution taxes) with estimated realization or intended for sale or consumption within 12 months, as of the balance sheet dates, are classified as current assets. Liabilities (except for deferred income and social contribution taxes) with estimated settlement within 12 months, as of the balance sheet dates, are classified as current. All the other assets and liabilities (including deferred taxes) are classified as “noncurrent”. Deferred tax assets and liabilities are classified as “noncurrent”, net per legal entity, as set forth in the corresponding accounting pronouncement.
5. Conversion of subsidiaries and associates located in other countries
The financial statements are presented in reais, which is the functional currency. Every entity defines its functional currency and all of their financial transactions are measured in that currency. The financial statements of subsidiaries located in other countries that use a functional currency different from that of the parent company are translated into reais, on the balance sheet date, according to the following criterion:
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | Assets and liabilities, including goodwill and market value adjustments, are translated into reais at the exchange rate in effect on the balance sheet date. |
• | Statement of income and cash flow statement are translated into reais using the average rate, except if there are significant variations, in this case it is used the rate in effect on the date of the transaction. |
• | Shareholders’ equity accounts are maintained at the historical balance in reais and the variation is recorded under the caption of equity adjustments as other comprehensive results. |
The differences of exchange variations are recognized directly in a separate item of the shareholders’ equity. When a foreign operation is sold, the accumulated value of exchange variation adjustment in the shareholders’ equity is recorded in the result for the year.
The effects of the conversion of the investment into a foreign operation are recognized in separate items of the shareholders’ equity and reclassified to the result for the year upon write-off of the investment.
6. | Accounting for shareholding interest at cost derived from corporate restructurings and carried out with related parties |
CBD accounts for interest derived from corporate restructurings acquired from related parties with no economic essence. The difference between the balance of cost and the value acquired is recorded in the shareholders’ equity, when the transaction is made between companies under common control. The transactions do not qualify as business combination.
7. Adoption of principal accounting judgments, estimates and assumptions
The preparation of the individual and consolidated financial statements of CBD requires judgments and estimates and adoption of assumptions affecting the amounts of income, expenses, assets and liabilities and the evidence of contingent liabilities in the analysis of the financial statements, however, the uncertainties relating to these assumptions and estimates may produce results that require material adjustments at the book value of assets or liabilities in future years.
In the process of application of CBD’s accounting policies, it was adopted judgments which had greater effect on values recognized in the individual financial statements regarding:
• Reduction at recoverable value - impairment;
• Inventories: Recognition of provisions for expected losses;
• Recoverable taxes: Expected realization of tax credits;
Fair value of derivatives and other financial Instruments: Measurement of the fair value of derivatives;
• | Provision for lawsuits: Recognition of provision for lawsuits representing expected probable losses estimated on reasonable basis; |
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• Income tax: Recognition of provisions based on reasonable estimates;
• | Stock-based payments: Estimate of the fair value of the operations based on evaluation model; |
• | Business combination: Estimates of the fair value of assets and liabilities acquired in the business combination and resulting goodwill; and |
• | Lease: Definition of the term of the lease agreement and incremental interest rate. |
8. Cash and Cash Equivalents
Comprise cash, bank accounts and short-term investments of high liquidity, immediately convertible into known values of cash and subject to immaterial risk of change of value, with intention and possibility of redemption in up to 90 days from the date of investment.
9. Accounts Receivable
The balances of accounts receivable are recorded initially at the transaction value, which corresponds to the sales value, and are subsequently measured according to the portfolio: (i) at fair value through other comprehensive results (VJORA), for receivables from credit card companies and (ii) at amortized cost, for the other portfolios.
For all the portfolios, estimated losses are taken into consideration and are recognized based on quantitative and qualitative analyses, history of actual losses in the past 24 months, credit rating and considering information on projections of assumptions related to macroeconomic events such as unemployment rate and consumer trust, as well as the volume of past-due credits from the accounts receivable portfolio. CBD opted to measure provisions for accounts receivable losses for an amount equal to the credit loss expected for the entire life, applying the practical expedient of adopting a matrix of losses for each maturity range.
Provision for losses on financial assets measured at amortized cost is deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
In every date of presentation, CBD evaluates if the financial assets recorded at amortized cost or VJORA have indications of loss on recoverable value. A financial asset has indication of loss on reduction to recoverable value when there is one or more event with adverse impact on the estimated future cash flows of the financial asset.
The accounts receivable are considered uncollectible and, therefore, written off from the accounts receivable portfolio when the payment is not made after 360 days from the maturity date.
At every annual closing of the balance sheets, CBD evaluates if the assets or groups of financial assets presented loss on recoverable value.
10. Inventories
Accounted for at cost or net realizable value, whichever is lower. Inventories acquired are recorded at average cost, including storage and handling costs, to the extent they are required
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
to bring the inventories to their sale condition in the stores, less commercial agreements received from suppliers.
The net realizable value is the sale price in the normal course of business, less estimated costs to make the sale, such as: (i) taxes on sale; (ii) personnel expenses directly tied to sales; (iii) cost of goods; and (iv) other costs required to bring the goods to sale condition.
Inventories are reduced to their recoverable value through estimates of losses, breaks, scrapping, slow turnover of goods and estimate of loss for goods that will be sold with negative gross margin, which is periodically analyzed and evaluated for adequacy.
The commercial agreements received from suppliers are measured and recognized based on the contracts and agreements signed, and recorded in the result as the corresponding inventories are sold. They comprise agreements by purchase volume, logistic and specific deals for recovery of margin, reimbursement of expenses, among other, and are recorded as reduction of balances payable to the respective suppliers, when the Company contractually has the right to settle the liabilities with suppliers at the net values receivable under commercial agreements.
11. Recoverable Taxes
The Company records tax credits whenever it has legal, documental and factual opinion on these credits that allow their recognition, including estimate of realization, where the ICMS is recognized as reduction of “cost of goods sold” and the PIS and COFINS as reduction of result accounts on which the credits are calculated.
The realization of these taxes is made based on growth projections, operating issues and generation of debits for use of these credits by the companies of the Group.
12. Investments in controlled companies and associates
12.1. Interest in controlled companies, subsidiaries and associates
The determination of which subsidiaries are controlled by the Company and the procedures for full consolidation follow the concepts and principles established by CPC 36 (R3).
The financial statements of the subsidiaries are prepared on the same date of analysis of the financial statements of the Company, adopting consistent accounting policies.
In the individual financial statements, interest is calculated considering the percentage held by GPA or its subsidiaries.
In the individual financial statements, investments in controlled companies are accounted for under the equity method.
12.2. Accounting information of the associates
Investments in associates are accounted for under the equity method since it is an entity in which the Company exerts significant influence, but not the control, since (a) it is part of the shareholders’ agreement, appointing part of the management and having veto right in certain relevant decisions; and (b) power over operating and financial decisions. The associates are: (i) FIC managed by Itaú Unibanco S.A., (ii) Cnova N.V. which operates
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
mainly in the e-commerce in France; and (iii) Tuya, a finance investee of Éxito. There are no restrictions by the associates on transferring funds to the Company, for example as dividends.
13. Business combination and goodwill
Business combinations are accounted for under the acquisition method. The acquisition cost corresponds to the sum of the amount transferred, measured at fair value on the acquisition date, and the remaining amount of the noncontrolling shareholders’ interest in the acquired company. For every business combination, the buyer measures the noncontrolling shareholders’ interest in the acquired company at fair value or in proportion to the interest held in the identifiable net assets of the acquired company. The acquisition costs incurred are treated as expense and included in administrative expenses.
When the Company acquires a business, it evaluates the assets acquired and the financial liabilities assumed for the proper classification and designation according to the contractual terms, the economic circumstances and conditions on the acquisition date. This includes the separation of embedded derivatives in agreements by the acquired company.
Any contingent payment to be transferred by the buyer will be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent payment considered as asset or liability will be recognized through the result.
The goodwill is initially measured at cost, and the excess between the amount transferred and the amount recognized of noncontrolling shareholders’ interest on the assets acquired and liabilities assumed. If this payment is lower than the fair value of the net assets of the acquired subsidiary, the difference is recognized in the result as gain from advantageous purchase.
After the initial recognition, the goodwill is measured at cost, less non-recoverable losses. For purposes of test of loss on recoverable value, the goodwill acquired in a business combination is, since the acquisition date, allocated to each of the UGCs of the Company which should benefit from the business combination, regardless if other assets or liabilities of the acquired company are attributed to these UGCs.
Where the goodwill is part of an UGC and part of the operation within this unit is sold, the goodwill associated to the operation sold is included in the accounting value of the operation in the calculation of profit or loss on the sale of the operation. This goodwill is measured based on the values related to the operation sold and to the portion of the UGC that was maintained.
14. Properties for Investment
Properties for investment are measured at historical cost (including transaction costs), less accumulated depreciation and/or losses on non-recoverable losses, if any. The cost of properties for investment acquired in a business combination is calculated at fair value, pursuant to IFRS 3/ CPC 15 - Business Combination.
Properties for investment are written off when sold or when they are no longer permanently used and they are not expected to generate any future economic benefit from their sale. A property for investment is also transferred when there is intention to sell it and in this case it is classified as noncurrent assets held for sale. The difference between the net value from this sale and the book value of the asset is recognized in the statement of income for the year upon write-off.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
The properties for investment of the Company and its subsidiaries correspond to commercial areas and lots that are held for generation of income or future price appreciation.
The fair value of properties for investment is measured based on appraisals conducted by third parties.
15. Property, Plant and Equipment
The property, plant and equipment is stated at cost, net of accumulated depreciation and non-recoverable losses, if any. The cost includes the amount of acquisition of equipment and funding costs in connection with loans for long-term construction projects, provided that the recognition criteria are met. When significant items of property, plant and equipment are replaced, these items are recognized as individual assets, with specific useful lives and depreciations. Likewise, when a significant replacement is made, its cost is recognized in the book value of the equipment as replacement, provided that the recognition criteria are met. All the other repair and maintenance costs are recognized in the result for the year as incurred.
Category of assets Annual average depreciation rate | |
Buildings | 2.50% |
Improvements in own and third-party properties | 4.17% |
Machinery and equipment | 12.12% |
Installations | 8.19% |
Furniture and fixtures | 11.03% |
Other | 20.00% |
Property, plant and equipment and any significant parts are written off upon disposal or when they are not expected to generate any future economic benefit from their use or disposal. Any gains or losses resulting from the write-off of the assets are included in the result for the year.
The residual value, useful life of the assets and depreciation methods are reviewed at the closing of every year, and adjusted on prospective basis, when applicable. The Company reviewed the useful life of the property, plant and equipment in the year 2019 and concluded that there are no changes to be made in this fiscal year.
Interest of loans directly attributable to the acquisition, construction or production of an asset, which demands a substantial period of time to be finished for the intended use or sale (eligible asset), is capitalized as part of the cost of the respective assets during the construction phase. As of the date of commencement of operation of the corresponding asset, the capitalized costs are depreciated over the estimated useful life of the asset.
15.1. Reduction at recoverable value of non-financial assets
The impairment test aims to present the actual net realizable value of an asset. The realization can be directly or indirectly, through sale or cash generation in the use of the asset in the Company’s activities.
Every year, the Company conducts the impairment test of its tangible and intangible assets or whenever there is internal or external evidence that the asset can present loss on recoverable value.
The recoverable value of an asset is defined as the highest between its fair value or the
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
value in use of its cash generating unit - UGC, except if the asset does not generate cash inflows that are mostly independent from cash inflows from other assets or groups of assets.
If the book value of an asset or UGC exceeds its recoverable value, the asset is considered not recoverable and a provision is recognized in order to adjust the book value to its recoverable value. In the recoverable value evaluation, the estimated future cash flow is discounted to present value, adopting a discount rate, which represents the capital cost of the Company (WACC) which reflects current market evaluations in connection with the value of money over time and the specific risks of the asset.
16. Intangible Assets
Intangible assets acquired separately are measured at cost upon initial recognition, less amortization and non-recoverable losses, if any.
Internally generated intangible assets, excluding capitalized costs of development of software, are reflected in the result for the year in which they were incurred. Intangible assets comprise mainly software acquired from third parties, software developed for internal use, goodwill (right of use of stores), list of clients, advantageous lease agreements, advantageous agreements for supply of furniture and brands.
Intangible assets with definite useful life are amortized under the straight-line method. The period and amortization method are reviewed, at least, at the closing of the fiscal year. Changes in the estimated useful life or in the estimated standard use of the future economic benefits incorporated into the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting assumptions.
The costs of development of software recognized as asset are amortized over its definite useful life (5 to 10 years), whose amortization rate is 10.82%, and the amortization begins when the asset is put into operation.
Intangible assets with indefinite useful life are not amortized, but submitted to impairment tests at the closing of the fiscal year or whenever there is indication that their book value cannot be recovered, individually or at the level of the UGC. The evaluation is reviewed on annual basis to determine if the indefinite useful life remains valid. Otherwise, the useful life estimate is changed on prospective basis from indefinite to definite.
Gain or losses, when applicable, resulting from the derecognition of an intangible asset, are measured as the difference between net results from the disposal and the book value of the asset, being recognized in the result for the year upon write-off of the asset.
17. Financial Instruments
Financial assets are recognized when the Company assumes contractual rights to receive cash or other financial assets from contracts in which it is a party. Financial assets are derecognized when the rights to receive cash tied to financial assets expire or when the risks and benefits are substantially transferred to third parties. Assets and liabilities are recognized when rights or obligations are retained in the transfer by the Company.
Financial liabilities are recognized when the Company assumes contractual obligations for settlement in cash or assumes third-party obligations through a contract in which it is a party. Financial liabilities are derecognized when they are settled, extinguished or expired.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Purchases or sales of financial assets requiring delivery of assets within a term defined by regulation or convention in the market (negotiations under normal conditions)
are recognized on the negotiation date, that is, on the date in which the Company agrees to purchase or sell the asset.
17.1. Classification and measurement of financial assets and liabilities
Upon initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other results (“VJORA”) – or fair value through the result (“VJR”). The classification of financial assets is usually based on the business model where a financial asset is managed and has characteristics of contractual cash flows. Embedded derivatives in which the principal contract is a financial asset within the scope of the standard are never separated. In turn, the hybrid financial instrument is evaluated for classification as a whole.
A financial asset is measured at amortized cost if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is to maintain financial assets to receive contractual cash flows; and |
• | its contractual terms generate, on specific dates, cash flows related to the payment of principal and interest on the outstanding principal. |
A debt instrument is measured at VJORA if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is attained by the receiving of contractual cash flows as well as by the sale of financial assets; and |
• | its contractual terms generate, on specific dates, cash flows that are only payments of principal and interest on the outstanding principal. |
Upon initial recognition of an investment in equity instrument that is not held for trading, the Company may opt to irrevocably present subsequent changes in the fair value of investment in other Comprehensive Results (“ORA”). This option is made on investment by investment basis.
All financial assets not classified as measured at amortized cost or VJORA, as described above, are classified as VJR. This includes all derivative financial assets. Upon initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost, VJORA or VJR if this significantly eliminates or reduces an accounting mismatch which would otherwise arise (fair value option).
A financial asset (except for trade account receivable without a material financing component that is initially measured at the transaction price) is initially measured at fair value, plus, for an item not measured at VJR, transaction costs directly attributable to acquisition.
Financial assets measured at VJR - These assets are subsequently measured at fair value. The net result, including interest or income from dividends, is recognized in the result.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Financial assets at amortized cost - These assets are subsequently measured at amortized cost under the effective interest method. The amortized cost is reduced by losses on reduction to recoverable value. Interest income, and exchange gains and losses are recognized in the result. Any gain or loss on derecognition is recognized in the result.
Financial assets at VJORA - These assets are subsequently measured at fair value. Interest income is calculated under the effective interest method, exchange gains and losses and losses on reduction to recoverable value are recognized in the result. Other net results are recognized in ORA. Upon derecognition, the accumulated result in ORA is reclassified to the result.
17.2. Derecognition of financial assets and liabilities
A financial asset (or, as appropriate, part of a financial asset or part of a group of similar financial assets) is derecognized when:
• The rights to receive cash flows expire.
• | The Company transfers its rights to receive cash flows from the asset or the commitment to fully pay cash flows received to a third party, according to an onlending agreement; and (a) the Company has substantially transferred all the risks and benefits related to the asset; or (b) the Company did not transfer neither substantially retain all the risks and benefits related to the asset, but transferred its control. |
When the Company assigns its rights to receive cash flows from an asset or enters into onlending agreement, without having transferred or retained substantially all the risks and benefits related to the asset neither transferred the control of the asset, the asset is held and a corresponding liability is recognized. The transferred asset and the corresponding liability are measured in a way to reflect the rights and obligations retained by the Company.
A financial liability is derecognized when the underlying obligation is settled, cancelled or expired.
When a current financial liability is replaced by another from the same creditor, under substantially different terms, or when the terms of a current liability are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference between the respective book values is recognized in the result for the year.
17.3. Offsetting of financial Instruments
Financial assets and liabilities are offset and stated net in the financial statements, if, and only if, there is the right to offset values recognized and intention to settle on net basis or to realize the assets and settle the liabilities simultaneously.
18. Derivative Financial Instruments
The Company uses derivative financial instruments to put a limit on the exposure to the variation not related to the local market such as swaps of interest rates and swaps of exchange variation. These derivative financial instruments are initially recognized at fair value on the date in which the derivative contract is entered into and later remeasured at fair value at the closing of the fiscal years. The derivatives are recorded as financial assets when the fair value
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
is positive and as financial liabilities when negative. Gains or losses resulting from changes in the fair value of derivatives are recorded directly in the result for the year.
At the beginning of the hedge relation, the Company formally designates and documents the hedge relation to which it intends to apply hedge accounting, and its purpose and risk management strategy to contract it. The documentation includes identification of the hedge instrument, the item or operation covered by hedge, the nature of the hedged risk and how the Company should evaluate the efficiency of the changes in the fair value of the hedge instrument on the neutralization of the exposure to changes in the fair value of the item covered by hedge or the cash flow attributable to the hedged risk. These hedges are expected to be highly efficient on the neutralization of changes in fair value or cash flow, and are constantly evaluated to determine if they are actually being highly efficient over all the fiscal years of the financial reports to which they have been designated.
They are recorded as fair value hedges, following the procedures below:
• | The change in the fair value of a derivative financial instrument classified as fair value hedge is recognized as financial result. The change in the fair value of the hedged item is recorded as part of the book value of the hedged item, and is recognized in the statement of income for the year. |
• | Upon calculation of fair value, debts and swaps are measured at rates disclosed in the financial market and projected until their maturity date. The discount rate used for calculation under the method of interpolation of foreign currency loans is obtained through DDI curves, clean Coupon and DI, indexes disclosed by B3 and, for local currency loans it is used the DI curve, index disclosed by CETIP and calculated under the exponential interpolation method. |
The Company uses financial instruments only for protection against identified risks limited to 100% of the value of these risks. Operations with derivatives are solely used to reduce exposure to foreign currency and interest rate fluctuation, so as to maintain the stability of the capital structure.
19. Cash flow hedge
Derivative instruments are recorded as cash flow hedge, following the procedures below:
• | The efficient portion of gain or loss of the hedge instrument is recognized directly in the shareholders’ equity under Other Comprehensive Results, and if the hedge fails to meet the hedge ratio, but the risk management purpose remains unchanged, the Company should adjust (“rebalance”) the hedge ratio to meet the qualification criteria. |
• | Any remaining gain or loss in the hedge instrument (including from the “rebalance” of the hedge ratio) is an inefficiency and, therefore, should be recognized in the result. |
• | The values recorded under Other Comprehensive Results are immediately transferred to the statement of income together with the transaction object of hedge when affecting the result, for example, when a financial income or expense object of hedge is recognized or when an expected sale occurs. When the item object of hedge is the cost of a non-financial asset or liability, the values recorded in the shareholders’ equity are transferred to the initial book value of the non-financial asset or liability. |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | The Company should discontinue the hedge accounting on prospective basis only when the hedge relation fails to meet the qualification criteria (after taking into consideration any rebalance of the hedge relation). |
• | If the occurrence of the estimated transaction or firm commitment is no longer expected, the values previously recognized in the shareholders’ equity are transferred to the statement of income. If the hedge instrument expires or is sold, discontinued or exercised without replacement or rollover, or if its classification as hedge is cancelled, the gains or losses previously recognized in the comprehensive result remain deferred in the shareholders’ equity under Other Comprehensive Results until the expected transaction or firm commitment affects the result. |
20. Loss on recoverable value of financial assets
The Company adopts the expected credit loss model, which applies to financial assets measured at amortized cost, contractual assets and debt instruments measured at VJORA, but which does not apply to investments in equity instruments (shares) or financial assets measured at VJR.
Provisions for losses are measured at one of the following bases:
• | Credit losses expected for 12 months (general model): these credit losses result from possible events of default within 12 months from the balance sheet date, and subsequently, in case of deterioration of the credit risk, for the entire life of the instrument |
• | Credit losses expected for the entire life (simplified model): these credit losses result from all possible events of default over the expected life of a financial instrument |
• | Practical expedient: these credit losses are expected and consistent with reasonable and sustainable information available on the balance sheet date for past events, current conditions and forecast of future economic conditions, which allow to check future probable loss based on the historical loss occurred according to the maturity of the securities. |
The Company measures provisions for losses on accounts receivable and other receivables and contractual assets for a value equal to expected credit loss for the entire life, where for trade accounts receivable, whose portfolio of receivables is dispersed, leases receivable, wholesale accounts receivable and accounts receivable from carriers, it is applied the practical expedient through adoption of a matrix of losses for each maturity range.
When determining if the credit risk of a financial asset has significantly increased since the initial recognition and when estimating the expected credit losses, the Company considers reasonable and sustainable information that is relevant and available without excessive cost or effort. It includes information and quantitative and qualitative analyses, based on the historical experience of the Company, credit evaluation and considering information on projections.
The Company assumes that the credit risk of a financial asset has significantly increased if it is more than 90 days past due. The Company considers a financial asset as default when:
• | it is unlikely that the debtor will fully pay its credit obligations to the Company without resorting to actions such as realization of guarantee (if any); or |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• the financial asset is past due for more than 90 days.
The Company determines the credit risk of a debt security based on analysis of the history of payments, current financial and macroeconomic conditions of the counterparty and evaluation of rating agencies when applicable, thus assessing each security individually.
The maximum period considered in the estimate of expected credit loss is the contractual period during which the Company is exposed to the credit risk.
Measurement of expected credit losses – Expected credit losses are estimates weighted by the probability of credit losses based historical losses and projections of related assumptions. Credit losses are measured at present value based on all cash shortages (that is, the difference between cash flows payable to the Company according to agreement and cash flows that the Company expects to receive).
Expected credit losses are discounted at the effective interest rate of the financial asset.
Financial assets with credit recovery issues – On each presentation date, the Company assesses if the financial assets stated at amortized cost and the debt securities measured at VJORA present indications of loss on recoverable value. A financial asset presents indications of loss on recoverable value when there is one or more events with negative impact on the estimated future cash flows of the financial asset.
Presentation of loss on reduction to recoverable value - Provision for losses for financial assets measured at amortized cost are deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
Losses on reduction to recoverable value related to trade accounts receivable and other receivables, including contractual assets, are presented separately in the statement of income and ORA. Losses of recoverable values of other financial assets are presented in ‘selling expenses’.
Accounts receivable and contractual assets - The Company considers the model and certain assumptions adopted in the calculation of these expected credit losses as the principal sources of uncertainty of the estimate.
The positions in each group were segmented based on usual characteristics of credit risk, such as:
• | Level of credit risk and history of losses – for wholesale clients and lease of properties; and |
• | Default status, risk of default and history of losses - for credit card companies and other clients. |
21. Provision for lawsuits
The provisions are recognized when the Company has a present obligation (legal or not formalized) in view of a past event, it is probable that cash outflow will be required to settle the obligation, and it is possible to make a reliable estimate of the value of this obligation. Expenses related to the provision are recorded in the result for the year, net of reimbursement. For success fees, the Company and its subsidiaries recognize a provision when the fees are
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
incurred, that is, upon final judgment of the lawsuits, being disclosed in the notes, the amounts involved in the lawsuits not yet concluded.
The assessment of the chance of loss includes analysis of available evidences, hierarchy of the laws, available case laws, the most recent court decisions, legal relevance, the history of occurrence and amounts involved and external lawyers’ opinion.
The provision for lawsuits is estimated by the Company and corroborated by its legal advisors and it was recognized in an amount considered sufficient to cover probable losses.
22. Commercial lease operations
Upon signing of contract, the Company assesses if it is, or contains, a lease. The contract is, or contains, a lease when it transfers the right of control over the use of an identified asset for a given period in exchange for payment.
The Company leases equipment and commercial spaces, including stores and distribution centers, under cancellable and non-cancellable commercial lease. The terms of the contracts range substantially from 5 to 25 years.
The Company as lessee
The Company assesses its lease contracts in order to identify relations of lease of a right of use, using exemptions provided for contracts under 12 months and where the individual amount of the asset is below US$ 5,000 (five thousand dollars). The contracts are then recorded, upon beginning of the lease, as Lease Liabilities against the Right of Use, both at the present value of minimum lease payments, using the implicit interest rate of the contract, if it can be used, or incremental interest rate considering loans obtained by the Company.
The lease term used in the measurement corresponds to the term that the lessee is reasonably certain to exercise the option to extend the lease or not to exercise the option to rescind the lease.
Subsequently, payments made are segregated between financial charges and reduction of lease liabilities, in order to obtain a constant interest rate on the balance of liabilities. The financial charges are recognized as financial expense for the period.
The right of use assets under lease contracts are amortized over the lease term. The capitalization of improvements, renewals and renovations in stores are amortized over their estimated useful life or over the expected term of use of the asset, unless there is evidence that the lease contract will not be extended.
Variable rents are recognized as expenses in the years in which they are incurred.
The Company as lessor
Commercial leases in which the Company does not transfer substantially all the risks and benefits from the ownership of the asset are classified as operating commercial leases. The initial direct trading costs of commercial leases are added to the book value of the leased asset and recognized over the term of the contract, on the same base of rent income.
Free translation |
Variable rents are recognized as revenue in the fiscal years in which they are earned.
23. Revenues to be accrued
Unearned revenues are recorded by the Company as liability for the anticipation of amounts received from commercial partners for the exclusivity in the provision of intermediation services for complementary or extended guarantees and values referring to the rental of gondola ends and backlight panels for displaying suppliers' products, and are recognized on the result for the year upon proof of service regarding the sale of these guarantees to business partners.
Free translation |
EXHIBIT 3 |
SENDAS DISTRIBUIDORA S.A.
Value of participation in Almacenes Éxito S.A.
(amounts in reais)
Through the barters, SENDAS delivers 39,246,012 Éxito shares, at book value and consistent with the market value of R$ 914,648,145.28, as calculated:
Equity value of the share | = | Participation value |
Number of shares |
Equity value of the share | = | 10,073,960,080.58 | = | R$ 23.3057602 |
432,256,668 |
Therefore, the 39,246,012 Éxito shares being delivered in the barter with CBD, have book value and are consistent with their market value of R$ 914,658,145.29.
Free translation |
EXHIBIT 4 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Value of the investment and Bellamar Empreendimentos e Participações Ltda.
FINANCEIRA ITAÚ CBD S/A CRÉDITO. FINANCIAMENTO E INVESTIMENTO
Shareholders | Ordinary shares | % | Market Value | |||
Itau Unibanco | 453,683,262 | 50% | 2,150,404,150.48 | |||
Bellamar Empreend. e Partic. Ltda | 324,501,114 | 35.7630% | 1,538,096,290.58 | |||
Lake Niassa Empreend. e Partic. Ltda. | 129,182,147 | 14.2370% | 612,307,855.16 | |||
Companhia Brasileira de Distribuição | 1 | 0.0000% | 4.74 | |||
Conselho | 8 | 0.0000% | 37.92 | |||
907,366,532 |
100,0000% |
4,300,808,338.88 |
The shares of Financeira Itaú CBD S.A. were valued independently and the appraisers
establish the value of the company's shares in a space of R$ 4.69 to R$ 4.93 per share.
In this evaluation, an average value of R$ 4.7399 was adopted.
Accordingly, the market value of Financeira Itaú CBD S.A. is R$ 4,300,808,338.88.
The market value of Bellamar's investment in FIC considering its participation and, as
shown above, is R$ 1,538,096,290.58.
BELLAMAR EMPREENDIMENTOS E PARTICIPAÇÕES LTDA
Quotaholders | Ordinary shares | % | Equity value | Market Value | ||||
Companhia Brasileira de Distribuição | 13,882,756,895 | 99.999% | 377,117,939.44 | 1,538,096,179.79 | ||||
Sendas Distribuidora S.A. | 1,000 | 0.0001% | 27.16 | 110.79 | ||||
13,882,757,895 |
100,0000% |
4,300,808,338.88 |
1,538,096,290.58 |
Consequently, the value of the CBD investment in Bellamar follows the same logic, with an amount of R$1,538,096,179.79.
In the barter, CBD delivers to SENDAS 50% (fifty percent) of the shares of Bellamar Empreendimentos e Participações S.A., for a market value of R$ 769,048,145.29.
Free translation |
EXHIBIT 5 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Description of the properties to be delivered in the Barter |
APPRAISAL REPORTS AT MARKET VALUE AND DESCRIPTION OF THE PROPERTIES
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 6 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Description of the real estate property located at Av. Tancredo Neves |
DESCRIPTION OF PROPERTIES TO BE DELIVERED FOR CAPITAL CONTRIBUTION
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 7 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Adjustments related to barters between CBD and Sendas |
(amounts in reais) |
An agreed condition to make the spin-off and merger feasible is the exchange of assets and the increase in capital of CBD in SENDAS. As a result of the exchange, the need arises to make certain adjustments, as listed below. The balance sheet which serves as the basis for the assessment needs to reflect these exchange and capital increases in order to include the impacts on equity resulting from them.
Order | Accounts | Debit | Credit |
1 | Investment (Éxito – exchange) | 231,351,906.62 | |
Investments (Éxito – shareholders’ equity) | 701,306,238.67 | ||
Fixed asset (Lands) | 24,793,024.31 | ||
Investments (Bellamar) | 188,558,882.31 | ||
Equity Adjustment - PL | 701,306,238.67 | ||
CBD records the successful shares received in exchange for the book value of the properties (R$ 24,793,024.31) and the value of the investment in Bellamar (R $ 188,558,882.31). Éxito's shares are currently adjusted for the equity method (R $ 699,826,802.69) | |||
2 | Investments – Sendas | 684,679,887.09 | |
Active balance on current account with Sendas | 140,142,381.00 | ||
Fixed assets – real estate property Tancredo Neves | 44,537,506,09 | ||
Cash and cash equivalents | 500,000,000.00 | ||
Capital increase to be carried out in December/20. | |||
3 | Equity adjustments | 701,306,238.67 | |
Investments -Sendas | 701,306,238.67 | ||
Adjustment in equity in Sendas resulting from the exchange of shares of Éxito | |||
4 | Investments | 701,306,238.67 | |
Other consolidated results | 701,306,238.67 | ||
Exclusion of internal goodwill in Sendas created in the exchange | |||
5 | Investments – Bellamar | 580,489,262.99 | |
Liabilities – Deferred IR | 145,122,315.75 | ||
Other consolidated results | 435,366,947.24 | ||
Adjustment to fair value of the investment in Bellamar, since with the spin-off, it is no longer a controlled company | |||
6 | Liabilities – Deferres IR CSLL | 15,561,349.81 | |
Accrued Profits | 15,561,349.81 | ||
[texto da tabela a ser traduzido] |
Free translation |
EXHIBIT 8 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet on 09/30/2020 adjusted by the exchanges and capital increase in the investee
(amounts in reais)
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet on 09/30/2020 adjusted by the exchanges and capital increase in the investee
Free translation |
EXHIBIT 9 |
SENDAS DISTRIBUIDORA S.A.
Net asset related to the operations of gas stations
to be spun-off and merged by CBD
Free translation |
EXHIBIT 10 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Merger of the net asset arising from spin-off of SENDAS
Free translation |
Free translation |
EXHIBIT 11 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Statement of interest on SENDAS’ capital
(amounts in reais)
Free translation |
EXHIBIT 12 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet after merger, adjustments and spin-off
Free translation |
Free translation |
EXHIBIT 13 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Distribution of capital stock due to spin-off
Shareholders | Shares | |||
Amount | Increase on 10/28/2020 | Amount | Interest | |
Wilkes Participações S/A | 94,019,178 | - | 94,019,178 | 35.04% |
Jean-Charles Naouri | 1 | - | 1 | 0.00% |
Geant International BV | 9,423,742 | - | 9,423,742 | 3.51% |
Segisor | 5,600,050 | - | 5,600,050 | 2.09% |
Casino Guichard Perrachon | 2 | - | 2 | 0.00% |
King LCC | 852,000 | - | 852,000 | 0.32% |
Helicco Participações Ltda | 581,600 | - | 581,600 | 0.22% |
BlackRock, Inc. | 13,396,829 | - | 13,396,829 | 4.99% |
Board of Direcotrs | 563,804 | - | 563,804 | 0.21% |
Board of Executive Officers | 241,807 | - | 241,807 | 0.09% |
Fiscal Council | 37,078 | - | 37,078 | 0.01% |
In Treasury | 239,060 | - | 239,060 | 0.09% |
Others | 143,381,075 | 15,341 | 143,396,416 | 53.44% |
Total | 268,336.226 | 15,341 | 268,351,567 | 100.0000% |
As commented, the spin-off from CBD will not imply in a reduction in equity capital or in the number of shares.
Free translation |
Exhibit 5.2.(iii)
CBD Protocol
PARTIAL SPIN-OFF PROTOCOL OF COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO WITH MERGER OF THE SPUN-OFF PORTION INTO SENDAS DISTRIBUIDORA S.A.
By the present private instrument and in strict accordance with the law, the Parties, qualified below:
I. | COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, a publicly-held company headquartered in the City of São Paulo, State of São Paulo, at Avenida Brigadeiro Luís Antônio, 3.172, Jardim Paulista, Zip Code 01402-000, enrolled with CNPJ/ME under the No. 47.508.411/0001-56, herein represented according to its bylaws (“CINDIDA” or “CBD”); and |
II. | SENDAS DISTRIBUIDORA S.A., a publicly-held company headquartered in the City of Rio de Janeiro, Estado do Rio de Janeiro, at Avenida Ayrton Senna, Lot 2 Pal 48959, Exhibit A, Jacarepaguá, Zip Code 22775-005, enrolled with CNPJ/ME under the No. 06.057.223/0001-71, herein represented according to its bylaws or (“SENDAS”) and, with the CBD, referred to as “Parties”, or, individually, “Party”). |
Whereas:
A. | CBD intends to segregate the cash and carry unit (wholesale self-service activity) by means of the CBD’s partial spin-off transaction (“CBD’s Spin-off”); |
B. | In connection with the purpose described above, the Parties’ respective managements deemed convenient and appropriate, by virtue of operational reasons, proceed with the CBD’s Spin-off, removing from assets and, consequently, equity, the total shareholding interest held in SENDAS, which shall be directly held by CBD, in the exact proportion of the shareholding interest held by each shareholder in the CBD’s capital stock (“Spun-off Portion”); |
C. | Before the CBD’s Spin-off, the Parties intend to perform the Parties intend to perform the partial spin-off of SENDAS, the CBD’s wholly-owned subsidiary, upon merger of the spun-off portion by the Company (“Sendas’ Spin-off”), that is, (a) the shareholding interest equivalent to approximately ninety point ninety-three percent (90.93%) of the total shares held by Almacenes Éxito S.A., company established and existing in accordance with the laws of Colombia, headquartered in Envigado, Departamento de Antioquia, Colombia, enrolled with CNPJ/ME under nº 23.041.875/0001-37 (“Éxito”), held by Sendas, corresponding to three hundred and ninety-three million, ten thousand, six hundred and fifty-six (393,010,656) shares, equivalent to approximately eight-seven point eighty percent (87.80%) of the total shares issued by Éxito (“Éxito’s Shareholding Interest”); (b) six (6) gas stations owned by Sendas (“Operating Assets”). Accordingly, |
Free translation |
Free Translation
the Parties entered into as of the date hereof the Sendas’ Spin-off Protocol (“Sendas’ Protocol”);
D. | Before the Sendas’ Spin-off, the Parties intend to perform (i) other transactions, as further described in section 4.2.1 below, which shall take place from the Base Balance Sheet, as defined below, to the date on which the meetings held by the Parties have approved the Sendas’ Spin-off and the CBD’s Spin-off (“Preparatory Procedures”); (ii) exchange of assets whereby CBD shall deliver certain assets to be subsequently developed by SENDAS, and SENDAS shall deliver a portion of the shares representing the Éxito’s capital stock; and |
E. | In connection with the scope of CBD’s Spin-off, SENDAS intends to list its shares in the “Novo Mercado” segment of B3 S.A. – Brasil, Bolsa, Balcão (“B3”), which is the segment for the listing of the CBD’s shares, dedicated to the companies that comply with the highest corporate governance level standards, in addition to the listing of the ADSs representing the SENDAS’ shares in the New York Stock Exchange (“NYSE”). The holders of the CBD’s shares and ADSs are entitled to the SENDAS’ shares and ADSs on the date indicated after the approval of the listing by B3 and NYSE, according to the notice to the shareholders disclosed by the Parties. |
ACCORDINGLY, the Parties resolved, as set forth in article 223 and following articles of Law 6404, of December 15, 1976 (“Brazilian Corporation Law”) and Instruction 565, of June 15, 2015, issued by the Brazilian Securities and Exchange Commission, to enter into this Partial Spin-off Merger of Companhia Brasileira de Distribuição, with Merger of the Spun-off Portion into Sendas Distribuidora S.A. (“Protocol”), under the terms and conditions set forth below:
I. PURPOSE
1.1. The purpose of this Protocol is to define the terms, conditions and explanations of the CBD’s Spin-off, with the segregation f the Spun-off Portion of the CBD’s equity, which shall be incorporated by SENDAS, under the terms set forth in article 229, paragraph 3, of the Brazilian Corporation Law.
II. CBD’S SPIN-OFF REASONS AND EXPLANATIONS AND INTEREST OF THE PARTIES FOR ITS ACHIEVEMENT
2.1 Based on the Material Fact disclosed by CBD and SENDAS to the shareholders and the market in general on September 9, 2020, the purpose of the transactions described in the Whereas Clause above is to achieve the full potential of the cash & carry business developed by SENDAS and the traditional retail business (multi retail) to be developed by CBD and its subsidiaries, operated on an independent basis, with separate management focused on the respective business
Free translation |
Free Translation
models and market opportunities. Additionally, the CBD’s Spin-off shall permit direct access to the capital market and other financing sources to each of the businesses to focus on the investment priorities in conformity with the profile of each company, creating, therefore, more value to the respective shareholders.
2.1.1. Upon implementation of the CBD’s Spin-off, the shares issued by SENDAS and held by CBD are directly delivered to the CBD’s shareholders, proportionally to the shareholding interest held in the CBD’s capital stock. Such distribution shall take place after SENDAS has obtained the authorization to list its shares in the B3’s “Novo Mercado” segment, in addition to the listing of the ADSs representing the SENDAS’ shares in the NYSE. After the obtaining of such registries, SENDAS and CBD shall disclose the Notices to the Shareholders to inform the distribution dates of the SENDAS’ shares and the initial trading date thereof in the securities market.
III. CONSTITUENT ELEMENTS OF SPUN-OFF PORTION AND LACK OF SOLIDARITY
3.1. The Spun-off Portion to be merged into SENDAS is exclusively composed of the shareholding interest held by CBD in SENDAS, equivalent, as of the date hereof, to one hundred percent (100%) of the shares issued by SENDAS, which, by virtue of the CBD’s Spin-off, shall be directly delivered to the CBD’s shareholders proportionally to the shareholders’ investments in the CBD’s capital, as referred to in the appraisal report of the Spun-off Portion, as further described in section 4.4. below (“Appraisal Report”), included in this Protocol in the form of Exhibit 3.1, attributable to the CBD’s shareholders in accordance with the provisions set forth in sections 6.1 and 8.3 below.
3.2. The Parties shall not be jointly responsible by virtue of the CBD’s Spin-off, as set forth in article 233, sole paragraph, of the Brazilian Corporation Law.
IV. APPRAISAL COMPANY, BASE DATE, SPUN-OFF PORTION APPRAISAL AND TREATMENT OF NET EQUITY VARIATIONS
4.1. The preparation of the Appraisal Report is under the responsibility of specialized company Magalhães Andrade Auditores Independentes S/S, enrolled with Regional Accounting Council of the State of São Paulo, under the No. 2SP000233/O-3 and with CNPJ/ME under the No. 62.657.242/0001-00, with head office in the City of São Paulo, State of São Paulo, at Av. Brigadeiro Faria Lima, nº 1.893, 6th floor, Jardim Paulistano (“Appraisal Company”).
4.1.1. The Parties’ shareholders shall ratify the indication of the Appraisal Company for preparation of the Appraisal Report at the Extraordinary General Meetings held to address the present Protocol, in conformity with the terms set forth in paragraph 1, article 227, of the Brazilian Corporation Law.
Free translation |
Free Translation
4.1.2. The Appraisal Company (i) is not interested, directly or indirectly, in the Parties or CBD’s Spin-off, as well as any other relevant circumstance that could characterize a conflict of interest; and (ii) is not aware of any action undertaken by the controller or directors and executive officers of the Parties to direct, limit, hamper or otherwise undertake any acts that impacted or could have impacted the access, use or knowledge of information, documents or work methodologies deemed relevant for the quality of conclusions.
4.2. For the purposes of the CBD’s Spin-off, the Spun-off Portion was evaluated based on the respective book value, according to the balance sheet revised by Ernst & Young Auditores Independentes S/S, enrolled with CNPJ/ME under the No. 61.366.936/0001-25, issued at September 30, 2020 (“Base Balance Sheet”), included in the present Protocol in the form of Exhibit 4.2., as set forth hereunder.
4.2.1. Under the terms defined in item (i) of the “Whereas Clause D” above, for purposes of such CBD’s Spin-off, the Preparatory Procedures shall have been recognized in the Base Balance Sheet, as described in detail below:
(i) the increase in SENDAS’ capital stock in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and eighty-seven reais and nine cents (R$ 684,679,887.09), being six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and thirty and ten cents (R$ 684,679,830.10) allocated to the corporate capital of SENDAS and fifty-six reais and ninety-nine cents (R$ 56.99) to the capital reserve of SENDAS. Such increase shall be made in assets, cash and credits, being forty-four million, five hundred and thirty-seven thousand, five hundred and six reais and nine cents (R$ 44,537,506.09), upon delivery of the net assets of the stores for future development by SENDAS, five hundred million reais (R$500,000,000.00) in cash and one hundred and forty million, one hundred and forty-two thousand, three hundred and eighty-one reais (R$140,142,381.00) upon capitalization of the credits held by CBD, to be resolved at the SENDAS’ Extraordinary Shareholders’ Meeting, which shall approve Sendas’ Spin-off and CBD’ Spin-off, resulting in the issuance of eighteen million, six hundred and sixty-one thousand, three hundred and sixty-eight (18,661,368) Sendas’ registered common shares, with no par value, which capital shall increase from four billion, seven hundred and forty-nine million, two thousand, two hundred and four reais and ninety-three cents (R$4,749,002,204.93) to five billion, four hundred and thirty-three million, six hundred and eighty-two thousand, thirty-five reais and three cents (R$5,433,682,035.03), divided into two hundred and eighty-seven million, twelve thousand, nine hundred and thirty five
Free translation |
Free Translation
(287,012,935) registered common shares, with no par value; and
(ii) the recognition of certain assets and liabilities arising from the transactions carried out between CBD and SENDAS and that are being defined in connection with CBD’s Spin-off, as described in detail in the instrument entered into between the Parties (“Corporate Separation Agreement”), totaling the net equity value of one hundred and sixty three million, one hundred and sixteen thousand, five hundred and sixty-five reais and twenty-five cents (R$163,116,565.25).
4.3. In the context of the Sendas’ Spin-off and the CBD’s Spin-off, and as part of the Sendas’ Spin-off, CBD shall exchange some assets, totaling nine hundred and fourteen million, six hundred and fifty-eight thousand, one hundred and forty-five reais and twenty-nine cents (R$914,658,145.29) (“CBD’s Assets”), for approximately nine point seven percent (9.07%) of the Éxito’s total shares held by SENDAS, corresponding to thirty-nine million, two hundred and forty-six thousand and twelve (39,246,012) shares (“Sendas’ Assets”). The composition of the CBD’s Assets is as follows:
(i) fifty percent (50%) of the shares representing the capital stock of Bellamar Empreendimento e Participações Ltda., enrolled with CNPJ/ME under No. 06.950.710/0001-69, which holds thirty-five point seventy-six (35.76%) of the capital stock of Financeira Itaú CBD S.A. – Crédito, Financiamento e Investimento, enrolled with CNPJ/ME under No. 06.881.898/0001-30, totaling seven hundred and sixty-nine million, forty-eight thousand, one hundred and forty-five reais and twenty-nine cents (R$769,048,145.29); and
(ii) Real Estate located in the City of Ribeirão Preto, State of São Paulo, at Rua Emílio Moço, s/nº, registered with public deeds under nºs 55.832, 55.833, 55.834 and 79.480 of the 2nd Real Estate Registry Office of Ribeirão Preto/SP; Real Estate located in the City of Feira de Santana, State of Bahia, at Avenida Presidente Dutra, nº 2.700, Bairro Santa Mônica, registered with public deeds under nºs 33.844 and 33.846 of the 2nd Real Estate Registry Office of Feira de Santana/BA; Real Estate located in the City of Campo Grande, State of Mato Grosso do Sul, at Avenida Bandeirantes, nº 3.270, Bairro Bandeirantes, registered with public deeds under nºs 1.319 and 25.760 of the 2nd Real Estate Registry Office of Campo Grande/MS; Real Estate located in the City of Americana, State of São Paulo, at Rodovia Luis Queiroz (SP-304), Jardim Thelja, registered with public deed under nº 67.954 of the Real Estate Registry Office of Americana/SP; and Real Estate located in the City of Fortaleza, State of Ceará, at Avenida Bernardo Manuel, nº 11.350, Bairro Itaperi, registered with public deed under nº 44.795 of the 2nd Real Estate Registry Office of Fortaleza/CE, totaling one hundred and forty-five million and six hundred and ten thousand reais (R$145,610,000.00).
Free translation |
Free Translation
4.4. As a result of the appraisal, taking into consideration the information and documents requested to the Parties’ managements, as well as the information available in the market and the information provided by the Appraisal Company, as deed necessary for the appraisal, the Appraisal Company delivered to the Parties the Appraisal Report, which amounts are subject to the analysis and approval at the Parties’ Extraordinary Shareholders’ Meetings, as set forth in the Brazilian Corporation Law.
4.4.1. As referred to in the Appraisal Report, the equity value of the Spun-off Portion, representing the shareholding interest held in SENDAS, calculated by the Appraisal Company, is one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38).
4.4.2. The CBD’s assets and liabilities that do not compose the Spun-off Portion shall remain as the CBD’s assets and liabilities.
4.5. SENDAS shall exclusively assume the changes in SENDAS’ net equity between the Base Balance Sheet date and the completion date of the CBD’s Spin-off, as reflected in CBD under the equity method of accounting, or by both companies in view of the subsequent events indicated in the Base Balance Sheet, however the case may be.
V. COMPANIES’ STATUS BEFORE THE CBD’S SPIN-OFF
5.1. SENDAS’ capital, considering the effects arising from the possible approval of the Sendas’ Spin-off, fully subscribed and paid, shall total seven hundred and sixty-one million, two hundred and seventy-four thousand, one hundred and thirty-four reais and seventy-eight cents (R$ 761,274,134.78), maintaining the same number of the SENDAS’ shares on the date immediately before the CBD’s Spin-off, that is, two hundred and eighty-seven million, twelve thousand, nine hundred and thirty-five (287,012,935) registered common shares, with no par value, owned by CBD, observed the provisions set forth in clause 5.1.1 below].
5.1.1. In order to comply with the proportion set forth in clause 2.1.1 above, at the same Sendas’ Extraordinary Shareholders’ Meeting held to approve the Sendas’ Spin-off, the shares shall be grouped so that the capital is represented by two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.
5.2. CBD’s capital stock on September 30, 2020, fully subscribed and paid, was of six billion, eight hundred and sixty-five million, two hundred and twenty thousand, one hundred and forty reais and two cents (R$ 6,865,220,140.02), divided into two hundred and sixty-eight million, three hundred and thirty-six thousand, two hundred and twenty-six (268,336,226) registered common
Free translation |
Free Translation
shares, with no par value. On October 28, 2020 CBD’s Board of Directors approved the increase of capital in the amount of six hundred and nine Thousand, four hundred and nine reais and five cents (R$ 609,409.05), by means of the issuance of fifteen thousand, three hundred and forty-one (15,341) common shares. Therefore, CBD’s capital stock, before the Parties’ Extraordinary Shareholders’ Meeting held to resolve on the Sendas’ Spin-off, fully subscribed and paid, is six billion, eight hundred and sixty-five million, eight hundred and twenty-nine thousand, five hundred and forty-nine reais and seven cents (R$6,865,829,549.07), divided into two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.
VI. CALCULATION OF SHARE EXCHANGE RATIO
6.1. The shares issued by SENDAS and owned by CBD shall be attributed to the CBD’s shareholders proportionally to the shareholders’ investments in the CBD’s capital. CBD shall remain the owner of approximately one hundred and sixty-five thousand (165,000) SENDAS’ registered common shares, with no par value, corresponding to approximately zero point zero six percent (0.06%) of the SENDAS’ total shares, which number is equivalent to the shares held in treasury on the date immediately before the CBD’s Spin-off.
6.2. SENDAS’ common shares, attributable to the CBD’s shares, are entitled to the same rights attributed to the SENDAS’ shares existing immediately before the CBD’s Spin-off, as well as all benefits, including dividends and interest on capital that may be declared by SENDAS as from the date that SENDAS has delivered these shares to the CBD’s shareholders, which shall take place after the listing of these shares in B3 and NYSE, on the date to be duly informed by the Parties, under the terms of section 8.4 below.
VII. CBD’S OPTION PLANS
7.1. In order to ensure the same treatment offered to the CBD’s shareholders, due to the CBD’s Spin-off, as set forth in this Protocol, the beneficiaries of the CBD’s Stock Option Plan and the Stock Option Compensation Plan (“CBD’s Option Plans”), provided that these options are granted through November 30, 2020, shall receive one (1) SENDAS’ common share for each one (1) CBD’s common share on the exercise dates of the CBD’s Option Plans.
7.1.1. In conformity with the provisions set forth in section 7.1 above, the SENDAS’ Extraordinary Shareholders’ Meeting that approved the SENDAS’ Spin-off shall also approve the SENDAS’ stock option plan and the stock option compensation plan (“Sendas’ Option Plans”), under the same terms attributable to the CBD’s Option Plans, which purpose is to grant the SENDAS’ stock option plans to the CBD’s beneficiaries entitled to the CBD’s Option Plans through November 30, 2020, provided that the grants have not been exercised until such date; besides, SENDAS may grant to its employees, in the future, the right to adhere to the Sendas’
Free translation |
Free Translation
Option Plans. The Sendas’ Option Plans shall authorize the issuance of up to two percent (2%) of the shares representing the SENDAS’ capital after the CBD’s Spin-off and SENDAS’ Spin-off, directed to the beneficiaries of the CBD’s Stock Option Plans and, in the future, to the SENDAS’ beneficiaries, that is, the same limit previously approved to the CBD’s beneficiaries, at the shareholders’ meeting that approved the CBD’s Stock Option Plans.
7.1.2 The exercise prices of the options granted in connection with the CBD, after the approvals of the Shareholders’ Meetings referred to in this Protocol, shall be allocated and paid to CBD and SENDAS, as set forth in this clause 7, proportionally to the average prices of the shares of both companies, calculated from the initial trading date of the Sendas’ shares in B3 to April 30, 2021. The Parties shall enter into contractual amendments with the CBD’s beneficiaries to define the provisions set forth in this clause.
VIII. COMPANIES’ STATUS AFTER THE CBD’S SPIN-OFF
8.1. In connection with the CBD’s Spin-off, CBD shall reduce its capital by one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38), from six billion, eight hundred and sixty-five million, eight hundred and twenty-nine thousand, five hundred and forty-nine reais and seven cents (R$6,865,829,549.07) to five billion, six hundred and forty-nine million, eight hundred and sixty-six thousand, five hundred and eighty-five reais and sixty-nine cents (R$5,649,866,585.69), upon maintenance of the same number of common shares, that is, two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.
8.2. By virtue of the CBD’s capital stock reduction, as set forth in section 8.1 above, article 4, of the CBD’s Bylaws, shall become effective with the following wording:
“ARTICLE 4 – The Company’s capital stock is five billion, six hundred and forty-nine million, eight hundred and sixty-six thousand, five hundred and eighty-five reais and sixty-nine cents (R$5,649,866,585.69), fully subscribed and paid, divided into two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.”
8.3. Considering that, as set forth in clause 3.1 above, CBD is currently owner and lawful holder of one hundred percent (100%) of the shares issued by SENDAS, the SENDAS’ capital is not subject to any change by virtue of the merger of the Spun-off Portion. Without prejudice, the total two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) SENDAS’ registered common shares, with no par value – owned by CBD immediately before the CBD’s Spin-off – shall be delivered to the CBD’s shareholders in
Free translation |
Free Translation
conformity with clauses 2.1.1, 5.1.1 and 6.1 above.
8.3.1. In connection with the abovementioned, Article 4, of SENDAS’ bylaws, has the following wording:
“Article 4 – The Company’s capital stock is seven hundred and sixty-one million, two hundred and seventy-four thousand, one hundred and thirty-four reaisand seventy-eight cents (R$ 761.274.134,78), fully subscribed and paid, divided into two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value.”
8.4. After the approval of Sendas’ Spin-off and the CBD’s Spin-off, SENDAS shall obtain the approval for listing its shares in the B3’s “Novo Mercado” segment, as well as the listing of the ADSs in NYSE. The holders of the CBD’s shares and ADSs are entitled to the SENDAS’ shares and ADSs, on the date indicated, subject to approval of the listing of these shares by B3 and NYSE, according to the notice to the shareholders disclosed on a timely basis by the Parties.
IX. CORPORATE APPROVALS
9.1. The completion of the CBD’s Spin-off shall depend on the following approvals:
a. | CBD’s Fiscal Council’s Meeting to opine on the CBD’s Spin-off, as set forth in article 163, III, of the Brazilian Corporation Law; |
b. | CBD’s Audit Committee’s Meeting to analyze, revise and recommend the measures and actions in connection with the CBD’s Spin-off; |
c. | CBD’s Financial Committee’s Meeting to analyze, revise and recommend the measures and actions in connection with the CBD’s Spin-off; |
d. | CBD’s Board of Directors’ Meeting to resolve on the submission of the proposal for the CBD’s Spin-off, under the terms set forth in this Protocol, for approval at the CBD’s Extraordinary Shareholders’ Meeting, as well as the matters relating to the CBD’s Option Plans; |
e. | SENDAS’ Board of Directors’ Meeting to resolve on the submission of the proposal for the CBD’s Spin-off, under the terms set forth in this Protocol, for approval at the SENDAS’ Extraordinary Shareholders’ Meeting, as well as the matters relating to the Sendas’ Option Plans; |
f. | SENDAS’ Extraordinary Shareholders’ Meeting to (a) approve the grouping of the |
Free translation |
Free Translation
shares so that the SENDAS’ capital is represented by two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value; (b) approve the terms and conditions set forth in this Protocol; (c) upon approval of the Protocol, ratify the indication of the Appraisal Company, responsible for the preparation of the Appraisal Report; (d) approve the Appraisal Report prepared by the Appraisal Company; (e) upon approval of the Appraisal Report, approve the CBD’s Spin-off, under the terms set forth in this Protocol; (f) authorize the SENDAS’ management to undertake the necessary measures to register the CBD’ Spin-off before the proper bodies; and (g) resolve on the SENDAS’ stock option plan and stock option compensation plan, according to the terms described in clause 7.1; and
g. | CBD’s Extraordinary Shareholders’ Meeting to (a) approve the terms and conditions set forth in this Protocol; (b) upon approval of the Protocol, ratify the indication of the Appraisal Company, responsible for the preparation of the Appraisal Report; (c) approve the Appraisal Report prepared by the Appraisal Company; (d) upon approval of the Appraisal Report, approve the CBD’s Spin-off, under the terms set forth in this Protocol; and (e) authorize the CBD’s management to undertake the necessary measures to register the CBD’s Spin-off before the proper bodies. |
X. WITHDRAWAL RIGHT
10.1. The Parties are not entitled to the withdrawal right in connection with the CBD’s Spin-off, considering that the CBD’s Spin-off shall not imply any of the events described in the article 137, item III, of the Brazilian Corporation Law.
XI. GENERAL PROVISIONS
11.1. The Preparatory Procedures and other corporate acts bound to the Sendas’ Spin-off and CBD’s Spin-off are effective upon approval of this Protocol at the Parties’ Shareholders’ Meetings held to resolve on the Sendas’ Spin-off and CBD’s Spin-off.
11.2. The costs and expenses incurred in relation to the CBD’s Spin-off and all related transactions are equally payable by the Parties.
11.3. The Parties’ managements, however the case may be, shall undertake all necessary acts, registries and notarizations to implement the CBD’s Spin-off, including the filing and disclosure of all acts related to the CBD’s Spin-off, as set forth in article 229, paragraph 4, of the Brazilian Corporation Law, as well as undertake the necessary registries before the proper bodies.
Free translation |
Free Translation
11.4. The Parties shall solely amend this Protocol upon notice in writing, subject to the Parties’ legal representatives' signature.
11.5. The failure or delay of any of the Parties to exercise any of the rights referred to herein shall not be deemed a waiver or novation and shall not affect the subsequent exercise of such right. Any waiver shall take effect only if made explicitly in writing.
11.6. The potential statement by any court of nullity or ineffectiveness of any of the covenants included herein shall not jeopardize the validity and effectiveness of the other covenants, which shall be fully complied with, and the Parties undertake to use their best efforts in order to validly adjust such covenant to obtain the same effects of the null or ineffective covenant.
11.7. This Protocol shall be executed on an unconditional and irrevocable basis, binding the parties and successors thereto on any account.
11.8. The assignment of any of the rights and obligations agreed upon herein is not permitted without the prior and express written consent of each Party.
11.9. The Parties elect the courts of the City of São Paulo, State of São Paulo, to the exclusion of any other, to settle any and all doubts and conflicts arising from this Protocol.
And, for being fair and contracted, the parties sign the present instrument in six (6) counterparts of same form and content, in the presence of the two undersigned witnesses.
São Paulo, December 09, 2020
SENDAS DISTRIBUIDORA S.A.
/s/Belmiro de Figueredo Gomes
By: Belmiro de Figueredo Gomes Title: Chief Executive Officer | /s/Daniela Sabbag Papa
By: Daniela Sabbag Papa Title: Investors Relation Officer |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
/s/Christophe José Hidalgo
By: Christophe José Hidalgo Title: Interim Chief Executive Officer, Finance Vice-President and Invertors Relation Officer | /s/Jorge Faiçal
By: Jorge Faiçal Title: Multi Retail President |
Free translation |
Free Translation
WITNESSES:
1. /s/ Mayara Zolko | 2. /s/ Donilo Marins |
Name: Mayara Zolko | Name: Donilo Marins |
ID | ID |
CPF/ME | CPF/ME |
Free translation |
Exhibit 3.1
Appraisal Report
[Page intentionally left in blank]
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Appraisal report at book value on the net assets for purposes of spin-off with merger |
November 24, 2020 | 1 00 0035/20 |
Free translation |
Dear Shareholders of
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO e de
SENDAS DISTRIBUIDORA S.A.
MAGALHÃES ANDRADE S/S AUDITORES INDEPENDENTES, audit and consulting firm, enrolled with the Regional Accounting Council of the State of are Paulo under number 2SP000233/O-3, registered with the National Registry of Legal Entities under number 62.657.242/0001-00 and located at Av. Brigadeiro Faria Lima, 1893 – 6th floor, Jardim Paulistano, São Paulo, Capital, appointed by you as expert to carry out the appraisal of the net assets at fair value of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO, for purposes of partial spin-off with merger into the equity of SENDAS DISTRIBUIDORA S.A, fulfilled the diligences and verifications required for the performance of its work, presents this instrument
APPRAISAL REPORT
which is subscribed.
São Paulo, November 24, 2020
MAGALHÃES ANDRADE S/S
Auditores Independentes
CRC2SP000233/O-3
GUY ALMEIDA ANDRADE
Accountant CRC1SP116758/O-6
APPRAISAL REPORT
INTRODUCTION
1. | The purpose of this spin-off and merger transaction is to separate certain assets of COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (CBD), which assets shall be delivered to its shareholders, as part of the corporate reorganization in the Group, to fully develop the potential cash & carry business developed by SENDAS DISTRIBUIDORA S.A. (SENDAS), from the traditional retail business to be developed by CBD and its subsidiaries, for purposes of independent operation, with separate management and focused on the respective business models and market opportunities. In addition, by virtue of the CBD’s Spin-off, each business shall have direct access to the capital market and other financing sources, to focus on the investment needs according to the profile of each company, creating, therefore, more value to the respective shareholders. |
2. | Therefore, the present Report has the purpose of determining the book value of the net assets to be spun-off and merged, taking into account the financial position of CBD at September 30, 2020. |
3. | Accordingly, we analyzed the CBD’s balance sheet on the base appraisal date. |
MANAGEMENT’S RESPONSIBILITY FOR ACCOUNTING INFORMATION
Free translation |
4. | The CBD’s management is responsible for the bookkeeping of the accounting books and the preparation of the accounting information in accordance with the accounting practices adopted in Brazil and for the adjustments to market prices, as well as for the relevant internal controls deemed necessary for the preparation of such accounting information free and clear from relevant distortion, regardless if caused by fraud or error. The main accounting practices adopted by the Company and determined by management are described in EXHIBIT 2 of the Appraisal Report. |
COVERAGE OF WORK AND LIABILITY OF THE ACCOUNTANT
5. | Our responsibility is to express a conclusion on the value of the CBD’s partial net assets as at September 30, 2020, based on the work conducted in conformity with Technical Communication CTG 2002, approved by the Federal Accounting Council (CFC), which provides for the application of procedures in the analysis of the balance sheet for issuance of the Appraisal Report. Therefore, we have executed the appraisal of said CBD’s balance sheet in accordance to the Brazilian and the international audit regulations, which require the compliance of ethical requirements by the accountant, as well as ensure that the work is planned and the executed with the purposes of obtaining reasonable assurance that the shareholders’ equity calculated for the preparation of our appraisal report, is free from any material misstatement. |
6. | The issuance of the appraisal report involves the performance of selected procedures for purposes of verification of the amounts included in the Appraisal Report. The procedures selected depend on the accountant’s judgment, including the assessment of the risks of material misstatement of the shareholders’ equity, whether due to fraud or error. In the evaluation of risks, we consider the relevant internal controls for preparation and proper presentation of the CBD’s balance sheet to determine the most appropriate procedures under the circumstances, however without expressing an opinion on these internal controls. Our work also includes an evaluation of the adequacy of the accounting policies adopted and reasonability of the management’s accounting estimates. We believe that the evidence obtained is sufficient and appropriate to substantiate our conclusion. |
CBD’S FINANCIAL POSITION
7. | The CBD’s financial position as at September 30, 2020, at book value, is reflected in the balance sheet, included in EXHIBIT 1, summarized as follows: |
ASSET | 33.150.111.359,18 | |
(-) LIABILITY | 20.058.061.757,91 | |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
8. | CBD keeps its accounting regular, and its operations registered in own book and its balances duly composed and reconciled. |
9. | CBD’s accounting procedures are compliant with the accounting practices adopted in Brazil, based on the technical pronouncements issued by the Accounting Pronouncements Committee (CPC) and, therefore, the accounting balances recognize the value of the investments stated at the value of the investees’ equity. EXHIBIT 2 shows the main accounting practices adopted by the management in order to prepare CBD’s balance sheet. |
Free translation |
10. | The accounting procedures consider, for purposes of evaluation of the assets and liabilities, that the Company may continue as a going concern. Our evaluation also considered that the Company may continue as a going concern. |
11. | The evaluation of the CBD’s assets to be spun off and transferred to its shareholders was carried out based on the book value, as set forth in article 226 of Law 6.404/76. |
EXTRA-ACCOUNTING ADJUSTMENTS TO REFLECT PRE-SPIN-OFF AGREEMENTS
12. | Before the spin-off, however after the base date of the equity evaluation, SENDAS and CBD agreed the barter, which shall be considered for purposes of this appraisal. |
13. | SENDAS holds 432.256.668 common shares of Almacenes Éxito S.A. (Éxito), representing 96,57% of Éxito’s capital at the book value of R$10.073.960.080,58 (ten billion, seventy-three million, nine hundred and seventy thousand and eighty reais and fifty-eight cents). The book value of this asset, which was currently acquired, is consistent with its respective market price. |
14. | As a contra entry to the barter, SENDAS shall deliver to CBD thirty-nine million, two hundred and forty-six thousand and twelve (39.246.012) shares of Éxito’s capital stock, representing 9,0793307% of the shares held, corresponding to 8,77% of the Éxito’s total common shares, at fair and book value of R$914.658.145,29. The evaluation is described in EXHIBIT 3. |
15. | As a contra entry, CBD shall deliver to SENDAS the following assets: |
Assets. | Book value | Fair value |
6.941.378.937 quotas of capital stock of Bellamar Empreendimento e Interests S.A. | 188.558.882,31 | 769.048.145,29 |
Land Feira de Santana | 13.286.435,20 | 15.070.000,00 |
Land Itaperi – Av. dos Expedicionários | 109.377,50 | 13.610.000,00 |
Land Ribeirão Preto – Av. Castelo Branco | 7.000.000,00 | 73.290.000,00 |
Land Americana – Rod. Luiz de Queiroz | 1.947.211,61 | 36.590.000,00 |
Land Campo Grande | 2.450.000,00 | 7.050.000,00 |
213.351.906,62 | 914.658.145,29 |
16. | The shareholding interest held by CBD in Bellamar, stated at book value and market price, is described in EXHIBIT 4. |
17. | The land exchanged is described in EXHIBIT 5, which includes the Appraisal Reports at Market Value of each land. |
18. | The barter is performed at fair value however recorded at book value, including the respective equity adjustments. |
19. | Before the spin-off, in addition to the barter, CBD agreed to contribute with two capital increases in SENDAS, in December, in the total amount of six hundred and eighty-four million, six hundred and seventy-nine thousand, eight hundred and eighty-seven reais and nine cents (R$684,679,887.09), in order to increase the shareholding interest value. The capital increases are broken down as follows: |
Current accounts asset balances between CBD and Sendas | 140.142.381,00 |
CBD’s properties delivered to SENDAS (Tancredo Neves and Santo Amaro) | 44.537.506,09 |
Cash capital contribution | 500.000.000,00 |
Free translation |
684.679.887,09 |
20. | Tancredo Neves and Santo Amaro assets are described in EXHIBIT 6. |
21. | The adjustments related to exchanges and capital increases are described in EXHIBIT 7. |
22. | The EXHIBIT 8 includes the balance sheet as at September 30, 2020, including adjustments. The CBD’s financial position, after such adjustments, is broken down as follows: |
ASSET | 33.150.111.359,18 |
(-) LIABILITY | 20.058.061.757,91 |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
SENDAS’ SPUN OFF PORTION MERGER
23. | Subsequently, as of the same date, SENDAS carried out the spin-off, whereby CBD shall merger three hundred and ninety-three million, ten thousand and six hundred and fifty-six (393,010,656) shares of the Éxito’s capital stock, at the fair value and book value of nine billion, one hundred fifty-nine million, three hundred and one thousand, nine hundred and thirty-five reais and twenty-nine cents (R$9,159,301,935.29), as described in EXHIBIT 3. |
24. | SENDAS’ spun-off net assets shall be merged into CBD, in the amount of twenty million, ninety-nine thousand, nine hundred and eighty-three reais and sixteen cents (R$20,099,983.16), in connection with the transaction involving the gas stations, as described in EXHIBIT 9. |
25. | Therefore, the CBD’s balance sheet, used as the base date of this spin-off, shall consider the merger in order to adjust the spun-off net asset. |
26. | By virtue of the SENDAS’ spin-off, CBD shall merger the net asset in the amount of nine billion, one hundred and seventy-nine million, four hundred and one thousand, nine hundred and eighteen reais and forty-five cents (R$9.179.401.918,45), relating to the investment in Éxito and the transaction involving the gas stations. |
27. | The adjustments for purposes of recognition of the merger of the investment in Éxito, in connection with SENDAS’ spun-off assets, are described in EXHIBIT 10, which also includes the CBD’s balance sheet after such merger, which financial position, used as the base date of this spin-off, is broken down as follows: |
ASSET | 33.156.760.490,63 |
(-) LIABILITY | 20.064.710.889,36 |
SHAREHOLDER’S EQUITY | 13.092.049.601,27 |
CBD’S SPIN-OFF
28. | By virtue of the barter at fair value, CBD excluded the internal goodwill arising from the transaction, in the amount of R$701.306.238,67. |
29. | Subject to approval of the spin-off, CBD shall recognize the investment in Bellamar at fair value, as CBD shall no longer control Bellamar. Such adjustment shall total R$580.489.262,99, net of deferred income tax and social contribution of R$145.122.315,75, totaling R$435.366.947,24. |
Free translation |
30. | CBD and SENDAS entered into an agreement, whereby CBD shall indemnify SENDAS in the event of occurrence of the contingencies recorded in liabilities by virtue of the activities transferred to CBD. In connection with this agreement, CBD recognized liabilities with SENDAS. Due to the income tax rate differences, CBD reduced the provision in the amount of R$15.561.349,81. |
31. | The CBD’s spun-off net asset is described in EXHIBIT 11 and refers to three billion, two hundred and twenty-seven million, nine hundred and ninety-four thousand and nine hundred and thirty-four (3,227,994,934) shares, representing SENDAS’ total capital stock, stated at equity value, after the barters, capital increase and spin-off, in the amount of one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38). The Shareholders’ Meetings of both companies shall approve the abovementioned spin-offs and merger. After the capital increases referred to in paragraph 19 above, the grouping of the SENDAS’ shares shall be approved, reflecting the same number of shares representing the CBD’s capital stock, that is, 268,351,567 shares. These SENDAS’ shares shall be delivered to the CBD’s shareholders, in the proportion of one share by one share of the capital stock. |
32. | On September 30, 2020 The CBD’s capital stock was divided into two hundred and sixty-eight million, three hundred and thirty-six thousand and two hundred and twenty-six (268,336,226) registered common shares, with no par value. On October 20, 2020 CBD’s capital stock was increased with the issuance of fifteen thousand, three hundred and forty-one (15.341) common shares being now represented by two hundred and sixty-eight million, three hundred and fifty-one thousand, five hundred and sixty-seven (268,351,567) registered common shares, with no par value, as described in EXHIBIT 13. |
33. | Once the spin-off shall reduce the CBD’s capital stock however not representing the exclusion or cancellation of the shares, the equity and unit value of the CBD’s shares shall be reduced, without any impact in the shareholding interest held by each shareholder. |
34. | The CBD’s financial position, after the adjustments and the spin-off, is described in EXHIBIT 12, broken down as follows: |
ASSET | 33.222.593.028,91 |
(-) LIABILITY | 20.225.394.554,92 |
SHAREHOLDER’S EQUITY | 12.997.198.473,99 |
35. | Due to the spin-off, the CBD’s shareholders’ equity is reduced to twelve billion, nine hundred and ninety-seven million, one hundred and ninety-eight thousand, four hundred and seventy-three reais and ninety-nine cents (R$12,997,198,473.99), with proportional effects in each account in shareholders’ equity. |
36. | The capital stock is reduced to five billion, six hundred and forty-nine million, two hundred and fifty-seven thousand, one hundred and seventy-six reais and sixty-four cents (R$5,649,257,176.64), which number of shares shall remain unchanged, as described in EXHIBIT 13. |
CONCLUSION
37. | Based on the tests, analyses and inspections, the shares representing the capital stock of SENDAS and owned by CBD, to be delivered to its shareholders, amount to at least one billion, two hundred and fifteen million, nine hundred and sixty-two thousand, nine hundred and sixty-three reais and thirty-eight cents (R$1,215,962,963.38). |
Free translation |
This REPORT is issued in 7 (seven) copies and it contains 6 (six) sheets and 13 (thirteen) exhibits, printed in only one side and initialed by the expert who subscribes this report
São Paulo, November 24, 2020
MAGALHÃES ANDRADE S/S Auditores Independentes CRC2SP000233/O-3 | GUY ALMEIDA ANDRADE Contador CRC1SP116758/O-6 |
Free translation |
Exhibit 1
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
EXHIBIT 2 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Principal accounting practices adopted |
in the preparation of the Balance Sheet on September 30, 2020 |
1. Basis of preparation
The individual financial statements have been prepared according to the Brazilian accounting practices, Law No. 6,404/76, particularly the technical pronouncements and interpretations issued by the Committee of Accounting Pronouncements - CPC, ratified by the Brazilian Securities Commission - CVM.
The financial statements have been prepared based on the historical cost, except for certain financial instruments measured at their fair values. All material information related to the financial statements, and only to them, is being evidenced and corresponds to that used by Management in its management of CBD’s activities.
2. Foreign-currency transactions
Foreign-currency transactions are initially recognized at the market value of the corresponding currencies on the date in which the transaction qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated into Real, according to the quotation of the respective currencies at the closing of the fiscal years. Differences in the payment or translation of monetary items are recognized in the financial result.
3. Adjustment at present value of assets and liabilities
Long-term assets and liabilities are adjusted at their present value, taking into consideration the contractual cash flows and the respective interest rate, explicit or implicit. Short-term assets and liabilities are not adjusted at present value.
4. Classification of assets and liabilities as current and noncurrent
Assets (except for deferred income and social contribution taxes) with estimated realization or intended for sale or consumption within 12 months, as of the balance sheet dates, are classified as current assets. Liabilities (except for deferred income and social contribution taxes) with estimated settlement within 12 months, as of the balance sheet dates, are classified as current. All the other assets and liabilities (including deferred taxes) are classified as “noncurrent”. Deferred tax assets and liabilities are classified as “noncurrent”, net per legal entity, as set forth in the corresponding accounting pronouncement.
5. Conversion of subsidiaries and associates located in other countries
The financial statements are presented in reais, which is the functional currency. Every entity defines its functional currency and all of their financial transactions are measured in that currency. The financial statements of subsidiaries located in other countries that use a functional currency different from that of the parent company are translated into reais, on the balance sheet date, according to the following criterion:
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | Assets and liabilities, including goodwill and market value adjustments, are translated into reais at the exchange rate in effect on the balance sheet date. |
• | Statement of income and cash flow statement are translated into reais using the average rate, except if there are significant variations, in this case it is used the rate in effect on the date of the transaction. |
• | Shareholders’ equity accounts are maintained at the historical balance in reais and the variation is recorded under the caption of equity adjustments as other comprehensive results. |
The differences of exchange variations are recognized directly in a separate item of the shareholders’ equity. When a foreign operation is sold, the accumulated value of exchange variation adjustment in the shareholders’ equity is recorded in the result for the year.
The effects of the conversion of the investment into a foreign operation are recognized in separate items of the shareholders’ equity and reclassified to the result for the year upon write-off of the investment.
6. | Accounting for shareholding interest at cost derived from corporate restructurings and carried out with related parties |
CBD accounts for interest derived from corporate restructurings acquired from related parties with no economic essence. The difference between the balance of cost and the value acquired is recorded in the shareholders’ equity, when the transaction is made between companies under common control. The transactions do not qualify as business combination.
7. Adoption of principal accounting judgments, estimates and assumptions
The preparation of the individual and consolidated financial statements of CBD requires judgments and estimates and adoption of assumptions affecting the amounts of income, expenses, assets and liabilities and the evidence of contingent liabilities in the analysis of the financial statements, however, the uncertainties relating to these assumptions and estimates may produce results that require material adjustments at the book value of assets or liabilities in future years.
In the process of application of CBD’s accounting policies, it was adopted judgments which had greater effect on values recognized in the individual financial statements regarding:
• Reduction at recoverable value - impairment;
• Inventories: Recognition of provisions for expected losses;
• Recoverable taxes: Expected realization of tax credits;
Fair value of derivatives and other financial Instruments: Measurement of the fair value of derivatives;
• | Provision for lawsuits: Recognition of provision for lawsuits representing expected probable losses estimated on reasonable basis; |
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• Income tax: Recognition of provisions based on reasonable estimates;
• | Stock-based payments: Estimate of the fair value of the operations based on evaluation model; |
• | Business combination: Estimates of the fair value of assets and liabilities acquired in the business combination and resulting goodwill; and |
• | Lease: Definition of the term of the lease agreement and incremental interest rate. |
8. Cash and Cash Equivalents
Comprise cash, bank accounts and short-term investments of high liquidity, immediately convertible into known values of cash and subject to immaterial risk of change of value, with intention and possibility of redemption in up to 90 days from the date of investment.
9. Accounts Receivable
The balances of accounts receivable are recorded initially at the transaction value, which corresponds to the sales value, and are subsequently measured according to the portfolio: (i) at fair value through other comprehensive results (VJORA), for receivables from credit card companies and (ii) at amortized cost, for the other portfolios.
For all the portfolios, estimated losses are taken into consideration and are recognized based on quantitative and qualitative analyses, history of actual losses in the past 24 months, credit rating and considering information on projections of assumptions related to macroeconomic events such as unemployment rate and consumer trust, as well as the volume of past-due credits from the accounts receivable portfolio. CBD opted to measure provisions for accounts receivable losses for an amount equal to the credit loss expected for the entire life, applying the practical expedient of adopting a matrix of losses for each maturity range.
Provision for losses on financial assets measured at amortized cost is deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
In every date of presentation, CBD evaluates if the financial assets recorded at amortized cost or VJORA have indications of loss on recoverable value. A financial asset has indication of loss on reduction to recoverable value when there is one or more event with adverse impact on the estimated future cash flows of the financial asset.
The accounts receivable are considered uncollectible and, therefore, written off from the accounts receivable portfolio when the payment is not made after 360 days from the maturity date.
At every annual closing of the balance sheets, CBD evaluates if the assets or groups of financial assets presented loss on recoverable value.
10. Inventories
Accounted for at cost or net realizable value, whichever is lower. Inventories acquired are recorded at average cost, including storage and handling costs, to the extent they are required
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
to bring the inventories to their sale condition in the stores, less commercial agreements received from suppliers.
The net realizable value is the sale price in the normal course of business, less estimated costs to make the sale, such as: (i) taxes on sale; (ii) personnel expenses directly tied to sales; (iii) cost of goods; and (iv) other costs required to bring the goods to sale condition.
Inventories are reduced to their recoverable value through estimates of losses, breaks, scrapping, slow turnover of goods and estimate of loss for goods that will be sold with negative gross margin, which is periodically analyzed and evaluated for adequacy.
The commercial agreements received from suppliers are measured and recognized based on the contracts and agreements signed, and recorded in the result as the corresponding inventories are sold. They comprise agreements by purchase volume, logistic and specific deals for recovery of margin, reimbursement of expenses, among other, and are recorded as reduction of balances payable to the respective suppliers, when the Company contractually has the right to settle the liabilities with suppliers at the net values receivable under commercial agreements.
11. Recoverable Taxes
The Company records tax credits whenever it has legal, documental and factual opinion on these credits that allow their recognition, including estimate of realization, where the ICMS is recognized as reduction of “cost of goods sold” and the PIS and COFINS as reduction of result accounts on which the credits are calculated.
The realization of these taxes is made based on growth projections, operating issues and generation of debits for use of these credits by the companies of the Group.
12. Investments in controlled companies and associates
12.1. Interest in controlled companies, subsidiaries and associates
The determination of which subsidiaries are controlled by the Company and the procedures for full consolidation follow the concepts and principles established by CPC 36 (R3).
The financial statements of the subsidiaries are prepared on the same date of analysis of the financial statements of the Company, adopting consistent accounting policies.
In the individual financial statements, interest is calculated considering the percentage held by GPA or its subsidiaries.
In the individual financial statements, investments in controlled companies are accounted for under the equity method.
12.2. Accounting information of the associates
Investments in associates are accounted for under the equity method since it is an entity in which the Company exerts significant influence, but not the control, since (a) it is part of the shareholders’ agreement, appointing part of the management and having veto right in certain relevant decisions; and (b) power over operating and financial decisions. The associates are: (i) FIC managed by Itaú Unibanco S.A., (ii) Cnova N.V. which operates
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
mainly in the e-commerce in France; and (iii) Tuya, a finance investee of Éxito. There are no restrictions by the associates on transferring funds to the Company, for example as dividends.
13. Business combination and goodwill
Business combinations are accounted for under the acquisition method. The acquisition cost corresponds to the sum of the amount transferred, measured at fair value on the acquisition date, and the remaining amount of the noncontrolling shareholders’ interest in the acquired company. For every business combination, the buyer measures the noncontrolling shareholders’ interest in the acquired company at fair value or in proportion to the interest held in the identifiable net assets of the acquired company. The acquisition costs incurred are treated as expense and included in administrative expenses.
When the Company acquires a business, it evaluates the assets acquired and the financial liabilities assumed for the proper classification and designation according to the contractual terms, the economic circumstances and conditions on the acquisition date. This includes the separation of embedded derivatives in agreements by the acquired company.
Any contingent payment to be transferred by the buyer will be recognized at fair value on the acquisition date. Subsequent changes in the fair value of the contingent payment considered as asset or liability will be recognized through the result.
The goodwill is initially measured at cost, and the excess between the amount transferred and the amount recognized of noncontrolling shareholders’ interest on the assets acquired and liabilities assumed. If this payment is lower than the fair value of the net assets of the acquired subsidiary, the difference is recognized in the result as gain from advantageous purchase.
After the initial recognition, the goodwill is measured at cost, less non-recoverable losses. For purposes of test of loss on recoverable value, the goodwill acquired in a business combination is, since the acquisition date, allocated to each of the UGCs of the Company which should benefit from the business combination, regardless if other assets or liabilities of the acquired company are attributed to these UGCs.
Where the goodwill is part of an UGC and part of the operation within this unit is sold, the goodwill associated to the operation sold is included in the accounting value of the operation in the calculation of profit or loss on the sale of the operation. This goodwill is measured based on the values related to the operation sold and to the portion of the UGC that was maintained.
14. Properties for Investment
Properties for investment are measured at historical cost (including transaction costs), less accumulated depreciation and/or losses on non-recoverable losses, if any. The cost of properties for investment acquired in a business combination is calculated at fair value, pursuant to IFRS 3/ CPC 15 - Business Combination.
Properties for investment are written off when sold or when they are no longer permanently used and they are not expected to generate any future economic benefit from their sale. A property for investment is also transferred when there is intention to sell it and in this case it is classified as noncurrent assets held for sale. The difference between the net value from this sale and the book value of the asset is recognized in the statement of income for the year upon write-off.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
The properties for investment of the Company and its subsidiaries correspond to commercial areas and lots that are held for generation of income or future price appreciation.
The fair value of properties for investment is measured based on appraisals conducted by third parties.
15. Property, Plant and Equipment
The property, plant and equipment is stated at cost, net of accumulated depreciation and non-recoverable losses, if any. The cost includes the amount of acquisition of equipment and funding costs in connection with loans for long-term construction projects, provided that the recognition criteria are met. When significant items of property, plant and equipment are replaced, these items are recognized as individual assets, with specific useful lives and depreciations. Likewise, when a significant replacement is made, its cost is recognized in the book value of the equipment as replacement, provided that the recognition criteria are met. All the other repair and maintenance costs are recognized in the result for the year as incurred.
Category of assets Annual average depreciation rate | |
Buildings | 2.50% |
Improvements in own and third-party properties | 4.17% |
Machinery and equipment | 12.12% |
Installations | 8.19% |
Furniture and fixtures | 11.03% |
Other | 20.00% |
Property, plant and equipment and any significant parts are written off upon disposal or when they are not expected to generate any future economic benefit from their use or disposal. Any gains or losses resulting from the write-off of the assets are included in the result for the year.
The residual value, useful life of the assets and depreciation methods are reviewed at the closing of every year, and adjusted on prospective basis, when applicable. The Company reviewed the useful life of the property, plant and equipment in the year 2019 and concluded that there are no changes to be made in this fiscal year.
Interest of loans directly attributable to the acquisition, construction or production of an asset, which demands a substantial period of time to be finished for the intended use or sale (eligible asset), is capitalized as part of the cost of the respective assets during the construction phase. As of the date of commencement of operation of the corresponding asset, the capitalized costs are depreciated over the estimated useful life of the asset.
15.1. Reduction at recoverable value of non-financial assets
The impairment test aims to present the actual net realizable value of an asset. The realization can be directly or indirectly, through sale or cash generation in the use of the asset in the Company’s activities.
Every year, the Company conducts the impairment test of its tangible and intangible assets or whenever there is internal or external evidence that the asset can present loss on recoverable value.
The recoverable value of an asset is defined as the highest between its fair value or the
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
value in use of its cash generating unit - UGC, except if the asset does not generate cash inflows that are mostly independent from cash inflows from other assets or groups of assets.
If the book value of an asset or UGC exceeds its recoverable value, the asset is considered not recoverable and a provision is recognized in order to adjust the book value to its recoverable value. In the recoverable value evaluation, the estimated future cash flow is discounted to present value, adopting a discount rate, which represents the capital cost of the Company (WACC) which reflects current market evaluations in connection with the value of money over time and the specific risks of the asset.
16. Intangible Assets
Intangible assets acquired separately are measured at cost upon initial recognition, less amortization and non-recoverable losses, if any.
Internally generated intangible assets, excluding capitalized costs of development of software, are reflected in the result for the year in which they were incurred. Intangible assets comprise mainly software acquired from third parties, software developed for internal use, goodwill (right of use of stores), list of clients, advantageous lease agreements, advantageous agreements for supply of furniture and brands.
Intangible assets with definite useful life are amortized under the straight-line method. The period and amortization method are reviewed, at least, at the closing of the fiscal year. Changes in the estimated useful life or in the estimated standard use of the future economic benefits incorporated into the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting assumptions.
The costs of development of software recognized as asset are amortized over its definite useful life (5 to 10 years), whose amortization rate is 10.82%, and the amortization begins when the asset is put into operation.
Intangible assets with indefinite useful life are not amortized, but submitted to impairment tests at the closing of the fiscal year or whenever there is indication that their book value cannot be recovered, individually or at the level of the UGC. The evaluation is reviewed on annual basis to determine if the indefinite useful life remains valid. Otherwise, the useful life estimate is changed on prospective basis from indefinite to definite.
Gain or losses, when applicable, resulting from the derecognition of an intangible asset, are measured as the difference between net results from the disposal and the book value of the asset, being recognized in the result for the year upon write-off of the asset.
17. Financial Instruments
Financial assets are recognized when the Company assumes contractual rights to receive cash or other financial assets from contracts in which it is a party. Financial assets are derecognized when the rights to receive cash tied to financial assets expire or when the risks and benefits are substantially transferred to third parties. Assets and liabilities are recognized when rights or obligations are retained in the transfer by the Company.
Financial liabilities are recognized when the Company assumes contractual obligations for settlement in cash or assumes third-party obligations through a contract in which it is a party. Financial liabilities are derecognized when they are settled, extinguished or expired.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Purchases or sales of financial assets requiring delivery of assets within a term defined by regulation or convention in the market (negotiations under normal conditions)
are recognized on the negotiation date, that is, on the date in which the Company agrees to purchase or sell the asset.
17.1. Classification and measurement of financial assets and liabilities
Upon initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other results (“VJORA”) – or fair value through the result (“VJR”). The classification of financial assets is usually based on the business model where a financial asset is managed and has characteristics of contractual cash flows. Embedded derivatives in which the principal contract is a financial asset within the scope of the standard are never separated. In turn, the hybrid financial instrument is evaluated for classification as a whole.
A financial asset is measured at amortized cost if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is to maintain financial assets to receive contractual cash flows; and |
• | its contractual terms generate, on specific dates, cash flows related to the payment of principal and interest on the outstanding principal. |
A debt instrument is measured at VJORA if it satisfies the two conditions below and is not classified as measured at VJR:
• | is maintained within a business model whose purpose is attained by the receiving of contractual cash flows as well as by the sale of financial assets; and |
• | its contractual terms generate, on specific dates, cash flows that are only payments of principal and interest on the outstanding principal. |
Upon initial recognition of an investment in equity instrument that is not held for trading, the Company may opt to irrevocably present subsequent changes in the fair value of investment in other Comprehensive Results (“ORA”). This option is made on investment by investment basis.
All financial assets not classified as measured at amortized cost or VJORA, as described above, are classified as VJR. This includes all derivative financial assets. Upon initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost, VJORA or VJR if this significantly eliminates or reduces an accounting mismatch which would otherwise arise (fair value option).
A financial asset (except for trade account receivable without a material financing component that is initially measured at the transaction price) is initially measured at fair value, plus, for an item not measured at VJR, transaction costs directly attributable to acquisition.
Financial assets measured at VJR - These assets are subsequently measured at fair value. The net result, including interest or income from dividends, is recognized in the result.
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
Financial assets at amortized cost - These assets are subsequently measured at amortized cost under the effective interest method. The amortized cost is reduced by losses on reduction to recoverable value. Interest income, and exchange gains and losses are recognized in the result. Any gain or loss on derecognition is recognized in the result.
Financial assets at VJORA - These assets are subsequently measured at fair value. Interest income is calculated under the effective interest method, exchange gains and losses and losses on reduction to recoverable value are recognized in the result. Other net results are recognized in ORA. Upon derecognition, the accumulated result in ORA is reclassified to the result.
17.2. Derecognition of financial assets and liabilities
A financial asset (or, as appropriate, part of a financial asset or part of a group of similar financial assets) is derecognized when:
• The rights to receive cash flows expire.
• | The Company transfers its rights to receive cash flows from the asset or the commitment to fully pay cash flows received to a third party, according to an onlending agreement; and (a) the Company has substantially transferred all the risks and benefits related to the asset; or (b) the Company did not transfer neither substantially retain all the risks and benefits related to the asset, but transferred its control. |
When the Company assigns its rights to receive cash flows from an asset or enters into onlending agreement, without having transferred or retained substantially all the risks and benefits related to the asset neither transferred the control of the asset, the asset is held and a corresponding liability is recognized. The transferred asset and the corresponding liability are measured in a way to reflect the rights and obligations retained by the Company.
A financial liability is derecognized when the underlying obligation is settled, cancelled or expired.
When a current financial liability is replaced by another from the same creditor, under substantially different terms, or when the terms of a current liability are substantially modified, this replacement or modification is treated as derecognition of the original liability and recognition of a new liability, and the difference between the respective book values is recognized in the result for the year.
17.3. Offsetting of financial Instruments
Financial assets and liabilities are offset and stated net in the financial statements, if, and only if, there is the right to offset values recognized and intention to settle on net basis or to realize the assets and settle the liabilities simultaneously.
18. Derivative Financial Instruments
The Company uses derivative financial instruments to put a limit on the exposure to the variation not related to the local market such as swaps of interest rates and swaps of exchange variation. These derivative financial instruments are initially recognized at fair value on the date in which the derivative contract is entered into and later remeasured at fair value at the closing of the fiscal years. The derivatives are recorded as financial assets when the fair value
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
is positive and as financial liabilities when negative. Gains or losses resulting from changes in the fair value of derivatives are recorded directly in the result for the year.
At the beginning of the hedge relation, the Company formally designates and documents the hedge relation to which it intends to apply hedge accounting, and its purpose and risk management strategy to contract it. The documentation includes identification of the hedge instrument, the item or operation covered by hedge, the nature of the hedged risk and how the Company should evaluate the efficiency of the changes in the fair value of the hedge instrument on the neutralization of the exposure to changes in the fair value of the item covered by hedge or the cash flow attributable to the hedged risk. These hedges are expected to be highly efficient on the neutralization of changes in fair value or cash flow, and are constantly evaluated to determine if they are actually being highly efficient over all the fiscal years of the financial reports to which they have been designated.
They are recorded as fair value hedges, following the procedures below:
• | The change in the fair value of a derivative financial instrument classified as fair value hedge is recognized as financial result. The change in the fair value of the hedged item is recorded as part of the book value of the hedged item, and is recognized in the statement of income for the year. |
• | Upon calculation of fair value, debts and swaps are measured at rates disclosed in the financial market and projected until their maturity date. The discount rate used for calculation under the method of interpolation of foreign currency loans is obtained through DDI curves, clean Coupon and DI, indexes disclosed by B3 and, for local currency loans it is used the DI curve, index disclosed by CETIP and calculated under the exponential interpolation method. |
The Company uses financial instruments only for protection against identified risks limited to 100% of the value of these risks. Operations with derivatives are solely used to reduce exposure to foreign currency and interest rate fluctuation, so as to maintain the stability of the capital structure.
19. Cash flow hedge
Derivative instruments are recorded as cash flow hedge, following the procedures below:
• | The efficient portion of gain or loss of the hedge instrument is recognized directly in the shareholders’ equity under Other Comprehensive Results, and if the hedge fails to meet the hedge ratio, but the risk management purpose remains unchanged, the Company should adjust (“rebalance”) the hedge ratio to meet the qualification criteria. |
• | Any remaining gain or loss in the hedge instrument (including from the “rebalance” of the hedge ratio) is an inefficiency and, therefore, should be recognized in the result. |
• | The values recorded under Other Comprehensive Results are immediately transferred to the statement of income together with the transaction object of hedge when affecting the result, for example, when a financial income or expense object of hedge is recognized or when an expected sale occurs. When the item object of hedge is the cost of a non-financial asset or liability, the values recorded in the shareholders’ equity are transferred to the initial book value of the non-financial asset or liability. |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• | The Company should discontinue the hedge accounting on prospective basis only when the hedge relation fails to meet the qualification criteria (after taking into consideration any rebalance of the hedge relation). |
• | If the occurrence of the estimated transaction or firm commitment is no longer expected, the values previously recognized in the shareholders’ equity are transferred to the statement of income. If the hedge instrument expires or is sold, discontinued or exercised without replacement or rollover, or if its classification as hedge is cancelled, the gains or losses previously recognized in the comprehensive result remain deferred in the shareholders’ equity under Other Comprehensive Results until the expected transaction or firm commitment affects the result. |
20. Loss on recoverable value of financial assets
The Company adopts the expected credit loss model, which applies to financial assets measured at amortized cost, contractual assets and debt instruments measured at VJORA, but which does not apply to investments in equity instruments (shares) or financial assets measured at VJR.
Provisions for losses are measured at one of the following bases:
• | Credit losses expected for 12 months (general model): these credit losses result from possible events of default within 12 months from the balance sheet date, and subsequently, in case of deterioration of the credit risk, for the entire life of the instrument |
• | Credit losses expected for the entire life (simplified model): these credit losses result from all possible events of default over the expected life of a financial instrument |
• | Practical expedient: these credit losses are expected and consistent with reasonable and sustainable information available on the balance sheet date for past events, current conditions and forecast of future economic conditions, which allow to check future probable loss based on the historical loss occurred according to the maturity of the securities. |
The Company measures provisions for losses on accounts receivable and other receivables and contractual assets for a value equal to expected credit loss for the entire life, where for trade accounts receivable, whose portfolio of receivables is dispersed, leases receivable, wholesale accounts receivable and accounts receivable from carriers, it is applied the practical expedient through adoption of a matrix of losses for each maturity range.
When determining if the credit risk of a financial asset has significantly increased since the initial recognition and when estimating the expected credit losses, the Company considers reasonable and sustainable information that is relevant and available without excessive cost or effort. It includes information and quantitative and qualitative analyses, based on the historical experience of the Company, credit evaluation and considering information on projections.
The Company assumes that the credit risk of a financial asset has significantly increased if it is more than 90 days past due. The Company considers a financial asset as default when:
• | it is unlikely that the debtor will fully pay its credit obligations to the Company without resorting to actions such as realization of guarantee (if any); or |
Free translation |
• Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
• the financial asset is past due for more than 90 days.
The Company determines the credit risk of a debt security based on analysis of the history of payments, current financial and macroeconomic conditions of the counterparty and evaluation of rating agencies when applicable, thus assessing each security individually.
The maximum period considered in the estimate of expected credit loss is the contractual period during which the Company is exposed to the credit risk.
Measurement of expected credit losses – Expected credit losses are estimates weighted by the probability of credit losses based historical losses and projections of related assumptions. Credit losses are measured at present value based on all cash shortages (that is, the difference between cash flows payable to the Company according to agreement and cash flows that the Company expects to receive).
Expected credit losses are discounted at the effective interest rate of the financial asset.
Financial assets with credit recovery issues – On each presentation date, the Company assesses if the financial assets stated at amortized cost and the debt securities measured at VJORA present indications of loss on recoverable value. A financial asset presents indications of loss on recoverable value when there is one or more events with negative impact on the estimated future cash flows of the financial asset.
Presentation of loss on reduction to recoverable value - Provision for losses for financial assets measured at amortized cost are deducted from the gross book value of the assets.
For financial Instruments measured at VJORA, the provision for losses is recognized in ORA, instead of reducing the book value of the asset.
Losses on reduction to recoverable value related to trade accounts receivable and other receivables, including contractual assets, are presented separately in the statement of income and ORA. Losses of recoverable values of other financial assets are presented in ‘selling expenses’.
Accounts receivable and contractual assets - The Company considers the model and certain assumptions adopted in the calculation of these expected credit losses as the principal sources of uncertainty of the estimate.
The positions in each group were segmented based on usual characteristics of credit risk, such as:
• | Level of credit risk and history of losses – for wholesale clients and lease of properties; and |
• | Default status, risk of default and history of losses - for credit card companies and other clients. |
21. Provision for lawsuits
The provisions are recognized when the Company has a present obligation (legal or not formalized) in view of a past event, it is probable that cash outflow will be required to settle the obligation, and it is possible to make a reliable estimate of the value of this obligation. Expenses related to the provision are recorded in the result for the year, net of reimbursement. For success fees, the Company and its subsidiaries recognize a provision when the fees are
Free translation |
Principal accounting practices adopted
in the preparation of the Balance Sheet on September 30, 2020
incurred, that is, upon final judgment of the lawsuits, being disclosed in the notes, the amounts involved in the lawsuits not yet concluded.
The assessment of the chance of loss includes analysis of available evidences, hierarchy of the laws, available case laws, the most recent court decisions, legal relevance, the history of occurrence and amounts involved and external lawyers’ opinion.
The provision for lawsuits is estimated by the Company and corroborated by its legal advisors and it was recognized in an amount considered sufficient to cover probable losses.
22. Commercial lease operations
Upon signing of contract, the Company assesses if it is, or contains, a lease. The contract is, or contains, a lease when it transfers the right of control over the use of an identified asset for a given period in exchange for payment.
The Company leases equipment and commercial spaces, including stores and distribution centers, under cancellable and non-cancellable commercial lease. The terms of the contracts range substantially from 5 to 25 years.
The Company as lessee
The Company assesses its lease contracts in order to identify relations of lease of a right of use, using exemptions provided for contracts under 12 months and where the individual amount of the asset is below US$ 5,000 (five thousand dollars). The contracts are then recorded, upon beginning of the lease, as Lease Liabilities against the Right of Use, both at the present value of minimum lease payments, using the implicit interest rate of the contract, if it can be used, or incremental interest rate considering loans obtained by the Company.
The lease term used in the measurement corresponds to the term that the lessee is reasonably certain to exercise the option to extend the lease or not to exercise the option to rescind the lease.
Subsequently, payments made are segregated between financial charges and reduction of lease liabilities, in order to obtain a constant interest rate on the balance of liabilities. The financial charges are recognized as financial expense for the period.
The right of use assets under lease contracts are amortized over the lease term. The capitalization of improvements, renewals and renovations in stores are amortized over their estimated useful life or over the expected term of use of the asset, unless there is evidence that the lease contract will not be extended.
Variable rents are recognized as expenses in the years in which they are incurred.
The Company as lessor
Commercial leases in which the Company does not transfer substantially all the risks and benefits from the ownership of the asset are classified as operating commercial leases. The initial direct trading costs of commercial leases are added to the book value of the leased asset and recognized over the term of the contract, on the same base of rent income.
Free translation |
Variable rents are recognized as revenue in the fiscal years in which they are earned.
23. Revenues to be accrued
Unearned revenues are recorded by the Company as liability for the anticipation of amounts received from commercial partners for the exclusivity in the provision of intermediation services for complementary or extended guarantees and values referring to the rental of gondola ends and backlight panels for displaying suppliers' products, and are recognized on the result for the year upon proof of service regarding the sale of these guarantees to business partners.
Free translation |
EXHIBIT 3 |
SENDAS DISTRIBUIDORA S.A.
Value of participation in Almacenes Éxito S.A.
(amounts in reais)
Through the barters, SENDAS delivers 39,246,012 Éxito shares, at book value and consistent with the market value of R$ 914,648,145.28, as calculated:
Equity value of the share | = | Participation value |
Number of shares |
Equity value of the share | = | 10,073,960,080.58 | = | R$ 23.3057602 |
432,256,668 |
Therefore, the 39,246,012 Éxito shares being delivered in the barter with CBD, have book value and are consistent with their market value of R$ 914,658,145.29.
Free translation |
EXHIBIT 4 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Value of the investment and Bellamar Empreendimentos e Participações Ltda.
FINANCEIRA ITAÚ CBD S/A CRÉDITO. FINANCIAMENTO E INVESTIMENTO
Shareholders | Ordinary shares | % | Market Value | |||
Itau Unibanco | 453,683,262 | 50% | 2,150,404,150.48 | |||
Bellamar Empreend. e Partic. Ltda | 324,501,114 | 35.7630% | 1,538,096,290.58 | |||
Lake Niassa Empreend. e Partic. Ltda. | 129,182,147 | 14.2370% | 612,307,855.16 | |||
Companhia Brasileira de Distribuição | 1 | 0.0000% | 4.74 | |||
Conselho | 8 | 0.0000% | 37.92 | |||
907,366,532 |
100,0000% |
4,300,808,338.88 |
The shares of Financeira Itaú CBD S.A. were valued independently and the appraisers
establish the value of the company's shares in a space of R$ 4.69 to R$ 4.93 per share.
In this evaluation, an average value of R$ 4.7399 was adopted.
Accordingly, the market value of Financeira Itaú CBD S.A. is R$ 4,300,808,338.88.
The market value of Bellamar's investment in FIC considering its participation and, as
shown above, is R$ 1,538,096,290.58.
BELLAMAR EMPREENDIMENTOS E PARTICIPAÇÕES LTDA
Quotaholders | Ordinary shares | % | Equity value | Market Value | ||||
Companhia Brasileira de Distribuição | 13,882,756,895 | 99.999% | 377,117,939.44 | 1,538,096,179.79 | ||||
Sendas Distribuidora S.A. | 1,000 | 0.0001% | 27.16 | 110.79 | ||||
13,882,757,895 |
100,0000% |
4,300,808,338.88 |
1,538,096,290.58 |
Consequently, the value of the CBD investment in Bellamar follows the same logic, with an amount of R$1,538,096,179.79.
In the barter, CBD delivers to SENDAS 50% (fifty percent) of the shares of Bellamar Empreendimentos e Participações S.A., for a market value of R$ 769,048,145.29.
Free translation |
EXHIBIT 5 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Description of the properties to be delivered in the Barter |
APPRAISAL REPORTS AT MARKET VALUE AND DESCRIPTION OF THE PROPERTIES
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 6 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Description of the real estate property located at Av. Tancredo Neves |
DESCRIPTION OF PROPERTIES TO BE DELIVERED FOR CAPITAL CONTRIBUTION
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
Free translation |
EXHIBIT 7 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Adjustments related to barters between CBD and Sendas |
(amounts in reais) |
An agreed condition to make the spin-off and merger feasible is the exchange of assets and the increase in capital of CBD in SENDAS. As a result of the exchange, the need arises to make certain adjustments, as listed below. The balance sheet which serves as the basis for the assessment needs to reflect these exchange and capital increases in order to include the impacts on equity resulting from them.
Order | Accounts | Debit | Credit |
1 | Investment (Éxito – exchange) | 231,351,906.62 | |
Investments (Éxito – shareholders’ equity) | 701,306,238.67 | ||
Fixed asset (Lands) | 24,793,024.31 | ||
Investments (Bellamar) | 188,558,882.31 | ||
Equity Adjustment - PL | 701,306,238.67 | ||
CBD records the successful shares received in exchange for the book value of the properties (R$ 24,793,024.31) and the value of the investment in Bellamar (R $ 188,558,882.31). Éxito's shares are currently adjusted for the equity method (R $ 699,826,802.69) | |||
2 | Investments – Sendas | 684,679,887.09 | |
Active balance on current account with Sendas | 140,142,381.00 | ||
Fixed assets – real estate property Tancredo Neves | 44,537,506,09 | ||
Cash and cash equivalents | 500,000,000.00 | ||
Capital increase to be carried out in December/20. | |||
3 | Equity adjustments | 701,306,238.67 | |
Investments -Sendas | 701,306,238.67 | ||
Adjustment in equity in Sendas resulting from the exchange of shares of Éxito | |||
4 | Investments | 701,306,238.67 | |
Other consolidated results | 701,306,238.67 | ||
Exclusion of internal goodwill in Sendas created in the exchange | |||
5 | Investments – Bellamar | 580,489,262.99 | |
Liabilities – Deferred IR | 145,122,315.75 | ||
Other consolidated results | 435,366,947.24 | ||
Adjustment to fair value of the investment in Bellamar, since with the spin-off, it is no longer a controlled company | |||
6 | Liabilities – Deferres IR CSLL | 15,561,349.81 | |
Accrued Profits | 15,561,349.81 | ||
[texto da tabela a ser traduzido] |
Free translation |
EXHIBIT 8 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet on 09/30/2020 adjusted by the exchanges and capital increase in the investee
(amounts in reais)
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet on 09/30/2020 adjusted by the exchanges and capital increase in the investee
Free translation |
EXHIBIT 9 |
SENDAS DISTRIBUIDORA S.A.
Net asset related to the operations of gas stations
to be spun-off and merged by CBD
Free translation |
EXHIBIT 10 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Merger of the net asset arising from spin-off of SENDAS
Free translation |
Free translation |
EXHIBIT 11 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Statement of interest on SENDAS’ capital
(amounts in reais)
Free translation |
EXHIBIT 12 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Balance sheet after merger, adjustments and spin-off
Free translation |
Free translation |
EXHIBIT 13 |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Distribution of capital stock due to spin-off
Shareholders | Shares | |||
Amount | Increase on 10/28/2020 | Amount | Interest | |
Wilkes Participações S/A | 94,019,178 | - | 94,019,178 | 35.04% |
Jean-Charles Naouri | 1 | - | 1 | 0.00% |
Geant International BV | 9,423,742 | - | 9,423,742 | 3.51% |
Segisor | 5,600,050 | - | 5,600,050 | 2.09% |
Casino Guichard Perrachon | 2 | - | 2 | 0.00% |
King LCC | 852,000 | - | 852,000 | 0.32% |
Helicco Participações Ltda | 581,600 | - | 581,600 | 0.22% |
BlackRock, Inc. | 13,396,829 | - | 13,396,829 | 4.99% |
Board of Direcotrs | 563,804 | - | 563,804 | 0.21% |
Board of Executive Officers | 241,807 | - | 241,807 | 0.09% |
Fiscal Council | 37,078 | - | 37,078 | 0.01% |
In Treasury | 239,060 | - | 239,060 | 0.09% |
Others | 143,381,075 | 15,341 | 143,396,416 | 53.44% |
Total | 268,336.226 | 15,341 | 268,351,567 | 100.0000% |
As commented, the spin-off from CBD will not imply in a reduction in equity capital or in the number of shares.
Free translation |
Exhibit 4.2
CBD’s Base Balance Sheet
[Page intentionally left in blank]
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO |
Balance sheet on September 30, 2020 |
Free translation |
Exhibit 6.4.
Consolidated By-Laws
This document is a free translation of the By-Laws (Estatuto Social) of Companhia Brasileira de Distribuição. Due to the complexities of language translation, translations are not always precise. The original document was prepared in Portuguese, and in case of any divergence, discrepancy or difference between this version and the Portuguese version, the Portuguese version shall prevail. The Portuguese version is the only valid and complete version and shall prevail for any and all purposes. There is no assurance as to the accuracy, reliability or completeness of the translation.
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO
Publicly-Held Company of Authorized Capital
Corporate Taxpayers’ Registry (CNPJ/ME) No. 47.508.411/0001-56
Commercial Registry (NIRE) No. 35.300.089.901
CHAPTER I
NAME, HEAD OFFICE, PURPOSE AND DURATION
ARTICLE 1 – COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (“Company”) is a publicly held company with head offices and jurisdiction at Av. Brigadeiro Luís Antonio, 3142, in the City of São Paulo, Federative Republic of Brazil, hereinafter governed by these By-laws, by Law 6,404 dated December 15th, 1976 (“Law No. 6,404/76”) as amended, and other applicable legal provisions.
Sole Paragraph – Upon the Company’s admission to the B3 S.A. – Brasil, Bolsa, Balcão (“B3”) Novo Mercado, the Company, and its shareholders, including controlling shareholders, officers and members of the Fiscal Council, when installed, will be subject to the provisions of B3’s Novo Mercado Regulations.
ARTICLE 2 – The corporate purpose of the Company is the sale of manufactured, semi- manufactured or raw products, both Brazilian and foreign, of any type or species, nature or quality.
First Paragraph – The Company may also engage in the following activities:
(a) manufacturing, processing, handling, transformation, exporting, importing and representation of food or non-food products either on its own or through third parties;
(b) international trade, including that involving coffee;
(c) importing, distribution and sale of cosmetic products for hygienic or make-up purposes, toiletries, sanitary and related products and food supplements;
(d) sale of drugs and medicines, pharmaceutical and homeopathic specialties, chemical products, accessories, dental care equipment, tools and equipment for surgery, production of chemical products and
Free translation |
pharmaceutical specialties, with the possibility that such activities of the Company are specialized as Drugstore, Allopathic Drugstore, Homeopathic Drugstore or Compounding Drugstore of each specialty;
(e) sale of oil products, filling up of fuels of any kind, rendering of technical assistance services, garage, repair, washing, lubrication, sale of accessories and other similar services, of any vehicles;
(f) sale of products, drugs and general veterinary medicines; veterinary consultation, clinic and hospital and pet shop with bath and shearing service;
(g) rental of any recorded media;
(h) provision of photo, film and similar studio services;
(i) execution and administration of real estate transactions, purchasing, promoting subdivisions and incorporations, leasing and selling real estate properties on the Company’s own behalf as well as for third parties;
(j) acting as distributor, agent and representative of merchants and industrial concerns established in Brazil or abroad and, in such capacity, for consignors or on its own behalf acquiring, retaining, possessing and carrying out any operations and transactions in its own interests or on behalf of such consignors;
(k) provision of data processing services;
(l) building and construction services of all kinds, either on its own behalf or for third parties, purchase and sale of construction materials and installation and maintenance of air conditioning systems, cargo loaders and freight elevators;
(m) use of sanitary products and related products;
(n) general municipal, state and interstate ground freight transportation for its own products and those of third parties, including warehousing, depositing, loading, unloading, packaging and guarding any such products, and subcontracting the services contemplated in this item;
(o) communication services, general advertising and marketing, including for bars, cafes and restaurants, which may extend to other compatible or connected areas, subject to any legal restrictions;
(p) purchase, sale and distribution of books, magazines, newspapers, periodicals and similar products;
(q) performance of studies, analysis, planning and markets research;
(r) performance of market testing for the launching of new products, packaging and labels;
Free translation |
(s) creation of strategies and analysis of “sales behavior in specific sectors”, of special promotions and of advertising;
(t) provision of management services of food, meal, drugstore, fuel and transportation vouchers/cards and other cards resulting from the activities related to its corporate purpose;
(u) lease and sublease of its own or third-party furnishings;
(v) provision of management services;
(w) representation of other companies, both Brazilian and foreign, and participation as a partner or shareholder in the capital stock of other companies irrespective of their form or object, and in commercial enterprises of any nature;
(x) agency, brokerage or intermediation of coupons and tickets;
(y) services related to billing, receipts or payments, of coupons, bills or booklets, rates, taxes and for third parties, including those made by electronic means or by automatic teller machines; supply of charging position, receipt or payment; issuing of booklets, payment forms, printed documents and documents in general;
(z) provision of services in connection with parking lot, permanence and the safeguarding of vehicles;
(aa) import of beverages, wines and vinegars;
(bb) sale of seeds and seedlings;
(cc) trade of telecommunications products; and
(dd) import, distribution and trade of toys, metallic pans, household ladders, baby strollers, party articles, school articles, tires, household appliances, bikes, monoblock plastic chairs and lamps.
Second Paragraph – The Company may provide guarantees or collateral for business transactions in its interest, although it must not do so merely as a favor.
ARTICLE 3 – The Company’s term of duration shall be indefinite.
CHAPTER II
CAPITAL STOCK AND SHARES
ARTICLE 4 – The Company Capital is R$ 5,649,866,585.69 (five billion, six hundred and forty-nine million, eight hundred and sixty-six thousand, five hundred and eighty-five reais and sixty nine cents),
Free translation |
fully subscribed and paid in, divided into 268,351,567 (two hundred sixty-eight million, three hundred fifty-one thousand, five hundred sixty-seven) common shares, all registered with no par value.
First Paragraph – The shares of capital stock are indivisible in relation to the Company and each common share entitles its holder to one vote at the General Shareholders’ Meetings.
Second Paragraph – The shares shall be recorded in book-entry systems and be kept in deposit accounts on behalf of their holders with the authorized financial institution designated by the Company, without issuance of share certificates.
Third Paragraph – The cost of the service of transferring the ownership of the book-entry shares charged by the depositary financial institution may be passed on to the shareholder, pursuant to the third paragraph of Article 35 of Law No. 6,404/76, subject to the maximum limits established by the Brazilian Securities Commission ("Comissão de Valores Mobiliários", or “CVM”).
Fourth Paragraph - The Company shall not issue preferred and founders' shares.
ARTICLE 5 – The Company is authorized to increase its capital stock by resolution of the Board of Directors without the need to amend the Company By-laws, up to the limit of four hundred million (400,000,000) common shares.
First Paragraph – The limit of the Company’s authorized capital shall only be modified by decision of a General Shareholders’ Meeting.
Second Paragraph – Within the limit of the authorized capital and in accordance with a plan approved by the General Shareholders’ Meeting, the Company may grant stock options to the members of its management bodies or employees, or to individuals providing services to the Company.
ARTICLE 6 – The issuance of shares, subscription bonuses or debentures convertible into shares up to the limit of the authorized capital, may be approved by the Board of Directors, with the exclusion or reduction of the term for the exercise of preemptive rights, as provided in Article 172 of Law No. 6,404/76.
Sole Paragraph – Except for the provision set out in the caput of this Article, the shareholders shall be entitled to preemptive rights, in proportion to their respective equity interests, in the subscription of any Company’s capital increases, which exercise shall be governed by the legislation applicable thereto.
CHAPTER III
GENERAL SHAREHOLDERS’ MEETING
ARTICLE 7 – The General Shareholders’ Meeting is the meeting of the shareholders, which shareholders may attend in person or by appointing and constituting their representatives under the provisions of the Law, in order to resolve on matters of interest to the Company.
Free translation |
ARTICLE 8 – The General Shareholders' Meeting shall be called, installed and chaired by the Chairman of the Board of Directors, or in his absence, by any of the Co-Vice-Chairmen of the Board of Directors or, in their absence, by an Officer appointed by the Chairman of the Board of Directors and shall have the following powers:
(I) the amendment to the Company's By-laws;
(II) the appointment and removal of members of the Company's Board of Directors at any time;
(III) the appointment and removal of the Chairman and the Co-Vice-Chairmen of the Company's Board of Directors;
(IV) the approval, annually, of the accounts of management and financial statements prepared by the Company´s management;
(V) the approval of any issuance of shares, bonuses, debentures convertible into its shares or securities or other rights or interests which are convertible or exchangeable into or exercisable for its shares, without limiting the powers of the Board of Directors provided in Article 5 and Article 17(g);
(VI) the approval of any appraisals of assets which the shareholders may contribute for the formation of the Company's capital;
(VII) the approval of any proposal for change the corporate form, amalgamation, merger (including absorption of shares), spin-off or split of the Company, or any other form of restructuring of the Company;
(VIII) the approval of any proposal for dissolution or liquidation of the Company, or for appointing or replacement of its liquidator(s);
(IX) the approval of the accounts of the liquidator(s); and
(X) the establishment of the global annual compensation of the members of the Board of Directors and of the Executive Board.
ARTICLE 9 – Any resolution of the General Shareholders’ Meeting shall be taken by the approval of shareholders representing at least the majority of votes of the shareholders present at the General Shareholders’ Meeting, excluding all the blank votes, except as otherwise required by the exemptions set forth by law and applicable regulation.
ARTICLE 10 – The Annual General Shareholders’ Meeting shall have the powers set forth in the law and shall take place during the first four months following the end of each fiscal year.
Free translation |
Sole Paragraph – Whenever necessary, the General Shareholders’ Meeting may be installed extraordinarily, and may be carried out subsequently to the Annual General Shareholders’ Meeting.
CHAPTER IV
MANAGEMENT
ARTICLE 11 – The Company shall be managed by a Board of Directors and an Executive Board.
First Paragraph – The investiture of the members of the Company’s management will be subject to the prior execution of an instrument of investiture which shall contemplate the arbitration clause provided for in Article 38.
Second Paragraph – The term of office of the Directors and Executive Officers shall be extended until their respective successors take office.
Third Paragraph – The minutes of the meetings of the Board of Directors and of the Executive Board shall be record in the proper book, which shall be signed by the present Directors and Executive Officers, as the case may be.
Section I
Board of Directors
ARTICLE 12 – The Board of Directors consists of at least seven (7) and no more than nine (9) members, elected and removed by the General Shareholders’ Meeting, with a unified term of office of two (2) years, reelection being allowed.
First Paragraph – In the event of permanent vacancy of a Director´s office, the Board of Directors shall elect a substitute to fulfill such position permanently, until the end of the relevant term in office. In the event of simultaneous vacancy of the majority of the positions, a General Shareholders’ Meeting shall be called in order to proceed with a new election.
Second Paragraph – Out of the members of the Board of Directors, at least two (2) members or twenty per cent (20%) of the members, whichever is higher, shall be Independent Directors, complying with the Novo Mercado Regulation, and the characterization of those appointed to the Board of Directors as Independent Directors must be deliberated at the General Shareholders’ Meeting that had elected them, provided that those members of the Board of Directors elected as set forth by Article 141, paragraphs 4 and 5 of Law No. 6,404/76, in the event of the existence of a controlling shareholder, shall be deemed as independent.
Third Paragraph – When, as a result of complying with the percentage set forth above, such calculation gives a fractional number, this fractional number shall be rounded up.
Free translation |
ARTICLE 13 – The Board of Directors shall have 1 (one) Chairman and up to 2 (two) Co-Vice-Chairmen, both appointed by the General Shareholders’ Meeting.
First Paragraph – The positions of Chairman of the Board of Directors and of Chief Executive Officer or main executive of the Company cannot be held by one and the same person.
Second Paragraph – In the event of vacancy or impediment of the Chairman of the Board of Directors, the Co-Vice-Chairman with the highest number of consecutive terms in the Company shall automatically take such position, remaining in office until the end of the respective term or, in the event of the convening of a General Shareholders’ Meeting for the appointment of a new Chairman, until its respective investiture.
Third Paragraph – In the event of vacancy or impediment of any of the Co-Vice-Chairman of the Board of Directors, such position shall remain vacant until the General Shareholders’ Meeting that decides on the appointment of a new Co-Vice-Chairman.
Fourth Paragraph – In the event of absence of the Chairman of the Board of Directors, the Board of Directors’ meetings shall be chaired, alternatively and successively, by the Co-Vice-Chairmen, starting such rotation with the Co-Vice-Chairman with the greater number of successive terms in the Company.
ARTICLE 14 – The Board of Directors shall ordinarily meet at least six times every year, to review the financial and other results of the Company and to review and follow-up on the annual operating plan, and shall extraordinarily meet whenever necessary.
First Paragraph – The Chairman, or, in his absence, any of the Co-Vice-Chairmen, shall call the meetings of the Board of Directors, by his or her initiative or at the written request of any Director.
Second Paragraph – The calls for the meetings of the Board of Directors shall be made by electronic means or letter, at least seven (7) days in advance, including the agenda of the meeting and specifying the place and date to be held on first call and, as the case may be, on second call. Any proposal of resolutions and all necessary documentation related thereto shall be at the Board of Directors disposal. The meetings shall be held regardless of the timeliness of the respective call notice in the case of attendance of all Directors in office at such time, or with the prior written consent of the absents Directors.
Third Paragraph – The presence of at least half of the members of the Board of Directors shall be required for the installation of a meeting of the Board of Directors on first call, and the presence of any number of the members of the Board of Directors shall be required for the installation of a meeting on second call. For purposes of the quorum required in this paragraph, the number of members present shall include the members represented as authorized by these By-laws.
ARTICLE 15 – The Board of Directors meetings shall be presided over by the Chairman of the Board of Directors, or in his absence, he shall be replaced by any of the Co-Vice-Chairmen of the Board of Directors, in accordance to the alternation rule set forth in the fourth paragraph of Article 1413.
Free translation |
First Paragraph – The resolutions of the Board of Directors shall be taken by the majority of votes cast by its members. Board members may participate in the meetings of the Board of Directors through e-conferencing, through video-conferencing or through any other means of electronic communications allowing the identification of the director and simultaneous communication with all the other ones attending the meeting. In this case, directors will be considered as present at the meeting and shall execute the corresponding minutes of such meeting afterwards.
Second Paragraph – In case of absence or temporary impediment of any member of the Board of Directors, the absent member may appoint, in writing, from among the other members of the Board of Directors, his or her substitute. In this case, the member who is replacing the temporarily absent or impeded member, in addition to his own vote, shall cast the vote of the substituted member.
ARTICLE 16 – The Board of Directors shall approve any modification of its Internal Regulations and appoint an Executive Secretary, who shall perform the duties defined in the Internal Regulations, as well as issue certificates and confirm, to third parties, the authenticity of resolutions taken by the Board of Directors.
ARTICLE 17 – In addition to the powers provided for in the applicable law, the Board of Directors shall have the powers to:
(a) set forth the general guidelines of the Company’s business;
(b) approve or amend the annual operating plan of the Company;
(c) appoint and remove the Executive Officers of the Company, establishing their duties and titles;
(d) supervise action of the Executive Officers of the Company, examine, at any time, the records and books of the Company, request information on agreements executed or to be executed and on any other acts or matters;
(e) call the General Shareholders’ Meeting;
(f) issue an opinion on the report of the management, the accounts of the Executive Board and the financial statements of the Company;
(g) approve the issuance of shares, bonuses, debentures convertible into its shares up to the limit of the authorized capital and establish the respective price and payment conditions;
(h) appoint and remove the independent public accountants, observing the Audit Committee’s recommendation;
(i) issue an opinion on any and all proposals of the Executive Board to be submitted to the General Shareholders’ Meetings;
Free translation |
(j) authorize the acquisition of shares of the Company for purposes of cancellation or maintenance in treasury, observing the applicable regulation;
(k) develop, jointly with the Executive Board, and approve a profit sharing and additional benefits program for the members of the management bodies and for the employees of the Company (a “Profit Sharing Program”);
(l) define the share of Company's profits to be allocated to the Profit Sharing Program in due compliance with the applicable legal provisions, these By-laws and the Profit Sharing Program in effect at such time. The amounts expensed or accrued in each fiscal year by way of profit sharing in addition to granting options to purchase shares of the Company’s stock shall be limited to fifteen per cent (15%) or less of the profit recorded in each fiscal year after the pertinent deductions have been effected in accordance with Article 189 of Law No. 6,404/76;
(m) set forth the number of shares to be issued under the stock option plan previously approved by the General Shareholders’ Meeting, provided that the limit established in item "l" above is duly observed;
(n) set up Committees that shall be responsible for making proposals or recommendations and giving their opinions to the Board of Directors and set forth each Committees’ respective powers, in accordance with the provisions of these By-laws;
(o) approve the acquisition, sale, disposal or creation of any lien on any asset, including any real estate, of the Company or any other investments made by the Company in an individual amount or cumulated over a fiscal year in excess of the amount in Reais equivalent to twenty million U.S. Dollars (US$20,000,000.00) or in excess of an amount equal to one percent (1%) of the net worth of the Company as determined in its latest annual balance sheet or quarterly financial statements, whichever is greater;
(p) approve any financial arrangement involving the Company, including the lending or borrowing of funds and the issuance of non-convertible debentures, in excess of an individual amount equivalent to one half (0.5) of EBITDA, as determined in the consolidated financial statements related to the preceding fiscal year;
(q) approve the joint venture of the Company with third parties involving an individual investment or cumulated over a fiscal year. in excess of the amount in Reais equivalent to twenty million U.S. Dollars (US$20,000,000.00) or in excess of an amount equal to one percent (1%) of the net worth of the Company as determined in its latest annual balance sheet or quarterly financial statements, whichever is greater;
(r) give favorable or unfavorable opinions on any takeover bid the object of which is the shares issued by the Company, by means of a well-grounded prior opinion, as set forth by the Novo Mercado Regulation; and
Free translation |
(s) the approval of any change in the Company's dividend policy.
First Paragraph – In case a resolution is to be taken by the corporate bodies of companies controlled by the Company or companies of which the Company elect its directors or executive officers, the Board of Directors shall instruct the vote to be cast by the Company’s management, in the case of decisions set forth in General Shareholders’ Meetings or in any equivalent body of such companies, or the vote to be cast by the members elected or appointed by the Company to the corporate management bodies of such companies if the matter of such resolution refers to the items (o), (p) and (q) of this Article, with the parameters referred to therein being calculated in accordance with the latest annual balance sheet or quarterly financial statements of such companies.
Second Paragraph – The Board of Directors shall approve a policy for related party transactions and may establish limits, authority and specific procedures for the approval of such transactions.
Section II
Audit Committee and Other Management’s Auxiliary Bodies
ARTICLE 18 – The audit committee, an advisory body to the Company’s Board of Directors, shall have, at least, three (3) members, which shall have at least one (1) independent Director and at least one (1) whom must have recognized experience in business accounting matters.
First Paragraph – The same member of the Audit Committee may accumulate the qualifications referred in the caput.
Second Paragraph – The members of the Audit Committee, subject to the provisions established in Article 20 and in Chapter V of these By-laws, shall be elected by the Board of Directors and meet all the applicable independence requirements as set forth in the rules of the Brazilian Securities Commission and the Novo Mercado Listing Regulation of B3.
Third Paragraph – The activities of the coordinator of the Audit Committee are defined in its internal regulations, approved by the Board of Directors.
ARTICLE 19 – The members of the Audit Committee shall be elected by the Board of Directors for a term of office of two (2) years, with reelection being permitted for successive terms, in accordance with the conditions set forth in the Audit Committee’s Internal Regulation.
First Paragraph - During their term of office, the members of the Audit Committee may not be replaced except for the following reasons:
(a) death or resignation;
(b) unjustified absence from three (3) consecutive meetings or six (6) alternate meetings per year; or
Free translation |
(c) a substantiated decision of the Board of Directors.
Second Paragraph – In the event of a vacancy in the Audit Committee, the Board of Directors shall elect a person to complete the term of office of the replaced member.
Third Paragraph – The Audit Committee has the following duties, among other:
(a) issue its opinion on the engagement or dismissal of the independent outside auditor;
(b) review the management report and the financial statements, periodic financial statements and quarterly financial information of the Company, and provide the recommendations it deems necessary to the Board of Directors;
(c) oversee the activities of the Company’s internal auditing and internal control departments;
(d) appraise and monitor the Company’s risk exposure;
(e) appraise and monitor the Company’s internal policies, including its policy on related-party transactions, and recommending corrections or enhancements; and
(f) have means to receive and treat information on noncompliance with the laws and regulations applicable to the Company, and with its internal rules and codes, including provision for specific procedures to protect whistleblowers and assure the confidentiality of such information.
ARTICLE 20 – In the event the Fiscal Council is established as set forth in Law 6,404/76 and in Chapter V below, the Audit Committee shall maintain its functions, subject to the powers granted to the Fiscal Council by law.
ARTICLE 21 – The Board of Directors may constitute other Committees and decide their composition, which shall have the function of receiving and analyzing information, elaborating proposals or making recommendations to the Board of Directors, in their specific areas, in accordance with their internal regulations to be approved by the Board of Directors.
Sole Paragraph – The members of the Committees created by the Board of Directors shall have the same duties and liabilities as the management of the Company.
Section III
Executive Board
ARTICLE 22 – The Executive Board shall be composed of at least two (2) and no more than fourteen (14) members, shareholders or not, resident in Brazil, appointed and removed by the Board of Directors,
Free translation |
being necessarily appointed one (1) as the Chief Executive Officer (the “CEO”), one (1) as the Investor Relations Executive Officer and the others as Vice Chief Executive Officers and Officers.
Sole Paragraph – The mandate period of the Executive Board is of two (2) years, reelection being permitted.
ARTICLE 23 – The Executive Officers shall be in charge of the general duties set forth in these By-laws and those establish by the Board of Directors and shall keep mutual cooperation among themselves and assist each other in the performance of their duties and functions.
First Paragraph – The duties and titles of each Executive Officer shall be established by the Board of Directors.
Second Paragraph – In the event of absences, occasional impairments and vacancy, the Executive Officers shall be replaced in the following manner:
(a) in the event of absences and occasional impairments of the CEO, he shall be replaced by another Executive Officer indicated by him and in the event of permanent vacancy, the Board of Directors shall appoint the CEO’s replacement within thirty (30) days, who shall complete the term of office of the CEO;
(b) in the event of absences and occasional impairments of the remaining Executive Officers, they shall be replaced by the CEO and, in the event of permanent vacancy, the Board of Directors shall appoint the Executive Officer’s replacement within thirty (30) days, who shall complete the term of office of the replaced Executive Officer.
ARTICLE 24 – The Executive Board shall meet upon call of the CEO or of half of the Executive Officers in office.
Sole Paragraph – The minimum quorum required for the installation of a meeting of the Executive Board is the presence of at least one-third (1/3) of the Executive Officers in office at such time. The resolutions of the Executive Board shall be approved by the majority of the votes of the Executive Officers present at the meeting. In the event of a tie in connection of any matter subject to the Executive Officers approval, such matter shall be submitted to the Board of Directors.
ARTICLE 25 – In addition to the duties that may be attributed to the Executive Board by the General Shareholders’ Meeting and by the Board of Directors, and without prejudice to the other legal duties, the Executive Board shall have the power to:
(i) manage the Company’s business and ensure compliance with these By-laws;
(ii) ensure that the Company’s purpose is duly performed;
Free translation |
(iii) approve all plans, programs and general rules of operation, management and control for the development of the Company, in accordance with the guidelines determined by the Board of Directors;
(iv) prepare and submit to the Annual General Shareholders’ Meeting a report on the corporate business activities, including the balance sheet and financial statements required by law for each fiscal year, as well as the respective opinions of the Fiscal Council, as the case may be;
(v) guide all Company's activities under the guidelines set forth by the Board of Directors and appropriate to the fulfillment of its purposes;
(vi) suggest investment and operating plans or programs to the Board of Directors;
(vii) authorize the opening and closing of branches, agencies or depots and/or institute delegations, offices and representations in any location of the national territory or abroad;
(viii) render an opinion on any matter to be submitted to the Board of Directors approval; and
(ix) develop and carry out, jointly with the Board of Directors, the Profit Sharing Program.
ARTICLE 26 – The Chief Executive Officer, in particular, is entitled to:
(a) plan, coordinate, conduct and manage all Company’s activities, as well as perform all executive and decision-making functions;
(b) carry out the overall supervision of all Company’s activities, coordinating and guiding the other Executive Officers’ activities;
(c) call and install the meetings of the Executive Board;
(d) coordinate and conduct the process of approval of the annual/multi-annual budget and of the investment and expansion plans together with the Board of Directors; and
(e) suggest functions and respective candidates for the Executive Officers positions of the Company and submit such suggestion to the Board of Directors approval.
ARTICLE 27 – It is incumbent upon the Executive Officers to assist and support the CEO in the administration of the Company, in accordance with duties determined by the Board of Directors, and perform all acts necessary for the Company’s regular activities, as long as these acts have been duly authorized by the Board of Directors.
ARTICLE 28 – The Executive Officers shall represent the Company actively and passively, in court and outside courts and before third parties, performing and signing all acts that result in obligations to the Company.
Free translation |
First Paragraph – For the granting of powers-of-attorney, the Company shall be represented by two (2) Executive Officers, acting jointly, and all powers-of-attorney shall have a validity term, except for powers-of-attorney granted for judicial purposes, in addition to the description of the powers granted which may cover any and all acts, including those related to banking operations.
Second Paragraph – In case of acts that entail any kind of acquisition, sale, disposal or creation of any lien on any of the Company’s asset, including any real estate, as well as, for the granting of powers-of-attorney for the practice of such acts, the Company is required to be represented jointly by two (2) Executive Officers, by two (2) attorneys-in-fact or by one (1) Executive Officer and one (1) attorney-in-fact of whom one must always be the CEO or an attorney-in-fact duly appointed by two (2) Executive Officers of whom one must be the CEO.
Third Paragraph – The Company shall be considered duly represented:
(a) jointly by two Executive Officers;
(b) jointly by one Executive Officer and one attorney-in-fact, duly appointed pursuant the provisions of these By-laws;
(c) jointly by two attorneys-in-fact, duly appointed pursuant the provisions of these By-laws; or
(d) solely by an attorney-in-fact or Executive Officer, in specific cases, when so determined by the respective power-of-attorney and in accordance with the powers contained therein.
CHAPTER V
FISCAL COUNCIL
ARTICLE 29 – The Company shall have a non-permanent Fiscal Council composed of three (3) members and equal number of alternates.
First Paragraph – The Fiscal Council shall only be installed at the shareholders’ request in accordance with the applicable legislation.
Second Paragraph – The Fiscal Council, if installed, shall approve its internal regulation, which shall provide for the general rules for its functioning, structure organization and activities.
Third Paragraph – The investiture of the members of the Fiscal Council will be subject to the prior execution of the instrument of investiture which shall contemplate the arbitration clause provided for in Article 38 below.
Free translation |
CHAPTER VI
FISCAL YEAR AND FINANCIAL STATEMENTS
ARTICLE 30 – The fiscal year ends on December 31 of each year, when the balance sheet and financial statements required by applicable law shall be prepared.
ARTICLE 31 – The Company may, at the discretion of the Executive Board, prepare quarterly or semi-annual balance sheets.
CHAPTER VII
DESTINATION OF PROFITS
ARTICLE 32 – Upon the preparation of the balance sheet, the following rules shall be observed with respect to the distribution of the profits:
(i) from the profits of the fiscal year shall be deducted, before any allocation of net profits, the accumulated losses and the provision of the income tax;
(ii) after deducting the portions described in item (i) above, the portion to be distributed in the form of employee and management profit sharing shall be deducted, as determined by the Board of Directors, in compliance with the Profit Sharing Program and under the terms and according to the limits provided in items "k" and "l" of Article 17 herein;
(iii) the remaining net profits shall have the following destination:
(a) 5% (five per cent) shall be allocated to the legal reserve fund until such reserve reaches the limit of 20% (twenty per cent) of the capital stock;
(b) amounts to the formation of the reserve for contingencies reserve, if so decided by the General Shareholders’ Meeting;
(c) 25% (twenty five per cent) shall be allocated to the payment of the mandatory dividends pursuant to first paragraph below;
(d) the profit not provisioned in the reserve described in second paragraph below and not allocated in accordance with the provisions of Article 196 of Law No. 6,404/76 shall be distributed as additional dividends.
First Paragraph – The mandatory dividends shall be calculated and paid in accordance with the following rules:
(a) the basis for calculation of the dividends payable shall be the net profit of the fiscal year, less the amounts allocated to the legal reserve and the contingency reserves and plus the amount obtained from the reversion of the reserves of contingencies formed in the previous fiscal years;
Free translation |
(b) the payment of the dividend calculated in accordance with the provisions of the previous item may be limited to the amount of the net profit of the fiscal year effectively realized pursuant to the law, provided that the difference is registered as reserve for profits to be realized;
(c) the profits registered in the reserve for profits to be realized, when realized and if such profits have not been absorbed by the losses in the subsequent fiscal years, shall be added to the first declared dividend after such realization.
Second Paragraph – It is hereby created, the Reserve for Expansion, which purpose shall ensure resources for financing additional investments in fixed assets and working capital and to which shall be allocated up to 100% of the remaining profits after the deductions and destinations established in items "a", "b" and "c" of item (iii) above. The total amount provisioned in such reserve shall nor exceed the total amount of the Company’s capital stock.
Third Paragraph – If duly authorized by the Board of Directors, the Company may elect to distribute interim dividends, ad referendum by the General Shareholders’ Meeting.
Fourth Paragraph – The Company may elect to pay or credit interest as remuneration on its own capital, calculated on the accounts of its net worth, in due observance of the rate and limits determined by law.
ARTICLE 33 – The amount of dividends shall be placed at the shareholders disposition within a maximum term of sixty (60) days as from the date of their allotment, and may be monetarily adjusted, if so determined by the Board of Directors, subject to the applicable legal provisions.
CHAPTER VIII
LIQUIDATION
ARTICLE 34 – The Company shall be liquidated in the cases provided by law, and the General Shareholders’ Meeting shall determine the form of liquidation, appoint the liquidator and the members of the Fiscal Council, which shall operate during the liquidation, and establish their compensation.
CHAPTER IX
SALE OF SHAREHOLDING CONTROL
ARTICLE 35 – The direct or indirect disposal of the power of control of the Company, whether through a single transaction or through continuous transactions, shall be contracted under the condition that the acquirer of control undertakes to perform a public tender offer for shares, having as subject matter shares issued by the Company held by other shareholders, subject to the terms and conditions provided by law and regulation in force and the Novo Mercado Regulation, in order to ensure treatment equal to the treatment provided to the seller.
Free translation |
CHAPTER X
ACQUISITION OF RELEVANT STAKE IN THE COMPANY
ARTICLE 36 – Any person, shareholder or Group of Shareholders that acquires, whether through a single transaction or through a series of transactions (“Purchasing Shareholder”): (a) direct or indirect ownership of an amount superior than 25% (twenty five percent) of the total of the Company shares, excluding shares kept in treasury; or (b) of any other shareholders rights, including usufructuary enjoyment or establishment of a trust, concerning an amount superior than 25% (twenty five percent) of the Company shares, excluding shares kept in treasury (“Significant Equity Interest”), shall undertake a tender offer to purchase up to the totality of the Company shares or to require registration with CVM and B3, as the case maybe, on the maximum deadline of 30 (thirty) days; The deadline shall begin on the date of the transaction that triggered the Significant Equity Interest and the tender offer, in addition to CVM’s and B3’s regulation, shall have the minimum requirements set forth in this article (“OPA”):
I. OPA shall be directed to all the Company shareholders and shall aim all the shares issued by the Company;
II. whichever is higher, the price of the OPA must not be less than: (i) the Economic Value determined in an appraisal report; (ii) the highest price paid by the Purchasing Shareholder during the 12 (twelve) months before the Purchasing Shareholder attained the Significant Equity Interest; and (iii) 125% of the weighted average unit price of the common shares issued by the Company during the period of 120 (one hundred twenty) trading sessions prior to the OPA; and
III. must be made in an auction to be held at B3.
Paragraph 1 – The pursuance of the OPA detailed in this article will not exclude the possibility of any other person, or shareholder to pursue a concurrent tender offer, as envisaged by the applicable regulation.
Paragraph 2 – The obligation set forth in Article 254-A of Law No. 6.404/76 and in Article 35 hereof shall not exempt the person, shareholder or Group of Shareholders from performing the obligations included in this Article.
Paragraph 3 – The person, shareholder or Group of Shareholders must comply with any standard requests or requirements of CVM and B3 related to the OPA, within the deadlines set forth in the applicable regulation.
Paragraph 4 – The provision of this Article 36 will not be applicable if the person, shareholder or Group of Shareholders becomes the holder of shares in an amount superior than the Significant Equity Interest as a result of: (a) merger with another company or merger of shares of another company into the Company; (b) if the Company purchases another company through private increase in corporate capital or subscription of shares by primary offering by any person who has pre-emption rights; or, if the Company purchases another company through private increase in corporate capital or subscription of shares by primary offering due to the lack of full payment by any person who has pre-emption rights or did not have
Free translation |
enough interested parties in the respective offer; and (c) in the event of public offerings (including restricted efforts ones).
Paragraph 5 – For calculation of the amount of the Significant Equity Interest, involuntary increases of equity interest resulting from cancelation of treasury stocks, repurchasing of shares by the Company or reduction of the corporate capital through the cancelation of shares shall not be accounted.
Paragraph 6 – For the purposes set forth herein, the following capitalized terms shall have the following meanings:
“Group of Shareholders” means a group of persons: (i) tied together by a voting agreement (including, without limitation, any individual or legal entity, investment fund, condominium, securities portfolio, rights agreement or other form of organization, resident, domiciled or headquartered in Brazil or abroad), knowing that the agreement can be direct, through controlled entities, controlling entities or companies under the same control; (ii) between which there is some sort of control relation; (iii) under the same control; or (iv) which act under joint interests. Among the examples of persons representing the same interest is: (a) any person who is directly or indirectly holder of equity interest equal or higher than 15% (fifteen percent) of the corporate capital of the respective other; and (b) two persons who have a mutual investor that is holder, directly or indirectly, of equity interest equal or higher than 15% (fifteen percent) of the corporate capital of any of the two persons. Any joint venture, investment fund, condominium, foundation, association, trust, consortium, securities portfolios, rights agreement or other form of organization, resident, domiciled or headquartered in Brazil or abroad, will be considered part of the same Group of Shareholders if two or more persons are: (c) controlled or managed by the same legal person or by related parties of the same legal person; or (d) under the management of the same directors (or the majority of the directors is the same), considering that, in investment funds with the same directors, only will be considered as a Group of Shareholders the ones in which the decision about the exercise of voting rights in General Shareholders Meetings, in accordance with the respective bylaws, is made through discretionary power of the respective director.
“Economic Value” means the value of the Company and of its shares as may be determined by a financial institution of first class with transactions in Brazil using discounted cash flow method.
ARTICLE 37 – The OPA provisioned in Article 36 can be waived by the General Shareholders Meeting if the conditions set forth below are met.
Paragraph 1 – The General Shareholders Meeting must be opened at first convening with the attendance of shareholders that represent a minimum of 2/3 (two thirds) of the total shares traded in the market.
Paragraph 2 – If the quorum provisioned in Paragraph 1 above is not met, the General Shareholders Meeting can be opened at second convening with the attendance of any number of shareholders of shares traded in the market.
Free translation |
Paragraph 3 – The approval of the resolution for the waiver of the OPA must be approved by the majority of the shareholders of shares traded in the market, excluded the votes from the Purchasing Shareholder.
CHAPTER XI
FINAL PROVISIONS
ARTICLE 38 – The Company, its shareholders, managers, members of the Fiscal Council, effective or alternates, if any, undertake to solve by means of arbitration before the Chamber of Market Arbitration, in the manner of its regulation, any divergence which might arise among them, related to or arising from their condition of issuer, shareholders, managers and members of the Fiscal Council, especially arising from the provisions established in the Law 6,385, of December 7, 1976, in the Law No. 6,404/76, in the By-laws of the Company, in the regulation issued by the Brazilian National Monetary Council, by the Central Bank of Brazil and by the CVM, as well as in any regulation applicable to the operation of capital markets in general, in addition to those contained in the Novo Mercado Regulation, other regulations of B3, and the Participation Agreement of the Novo Mercado.
ARTICLE 39 – The values in U.S. Dollars mentioned herein shall be exclusively used as reference for monetary update and shall be converted into Reals using the closing sale exchange rate for the U.S. Dollar published by the Central Bank of Brazil.
ARTICLE 40 – The cases not regulated in these By-laws shall be solved in conformity with applicable legislation and regulation, including the Novo Mercado Regulation.
***
Free translation |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO | |||
Date: January 4, 2021 | By: /s/ Christophe José Hidalgo | ||
Name: | Christophe José Hidalgo | ||
Title: | Interim Chief Executive Officer, Chief Financial Officer and Investor Relations Officer |
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.