Controlling shareholders of IGB Electronics launched tender offer to buy out minority shareholders
09/13/2022
Gradiente unveiled the intention to go private by acquiring shares from minority shareholders. The transaction is a step for IGB Electronics to exit the judicial reorganization that has been dragging on since 2018. With no prospect of resuming electronics production, the company still hopes being able to license the Gradiente brand for use by third parties, but there is no plan in place at the moment to implement this possibility.
Gradiente was one of the largest electronics companies in Brazil in the 1970s. Today, however, IGB is a non-operational company, and revenues come from leasing its factories in the Manaus Free Trade Zone.
Last Friday, the controlling shareholders of IGB Electronics launched an offer to pay R$40.51 per IGB share. The financial volume totaled more than R$1.7 million, compared with R$31,000 on Friday. The amount offered implies a 55% premium over the previous closing price.
The process of going private was already planned in its judicial reorganization approved by a court from Amazonas in 2019, said a source linked to the company, who spoke on condition of anonymity. “Today IGB is a security with derisory volume of trade, and having public float hinders the ability to leave the judicial reorganization,” the source added.
The offer was launched by controlling shareholder HAG Holding, a company created in 2008 to encompass the assets of Gradiente, which has Eugenio Emilio Staub as the only partner. The funds to buy the shares will be disbursed by Mr. Staub himself, the source said.
In 2021, IGB Electronics posted a net loss of R$54.1 million, a 36.1% reduction in losses compared to the previous year. Net revenue totaled R$5.5 million, up 5% compared to 2020.
“The main reason for going private is to reduce costs. Today, keeping the company public costs about R$1.5 million per year. In addition, this will eliminate speculation involving the securities,” the source said. IGB has about 850 minority shareholders, of which 761 have less than 1,000 shares.
A case of constant speculation involving IGB stock is the lawsuit the company is filing against Apple for the use of the iPhone trademark. In progress for more than 10 years, an appeal filed by the company is currently on hold at the Federal Supreme Court (STF) awaiting trial.
After successive defeats in court, last July, Prosecutor-General of the Republic Augusto Aras gave an opinion against IGB’s request, saying that Apple has the rights to use the iPhone trademark in the country, despite Gradiente’s claim that it registered it in 2000, seven years before the launching of the American cell phone.
The process of going private has nothing to do with the lawsuit involving Apple and the iPhone, said the source linked to the company. After a conciliation hearing failed to result in an agreement, the case awaits trial, with no set date.
After the end of the process, expected to happen in the coming weeks if there is no request for a meeting by up to 10% of minority shareholders, IGB plans its exit from the judicial reorganization process. The company recently reached an agreement with the Secretariat of Federal Revenue to renegotiate debts.
The source said that IGB only continues to exist for emotional reasons of the controlling family.
Founded by a group of engineering students from the University of São Paulo (USP) in October 1964 as a manufacturer of transistors amplifiers, an innovation at the time, the company was sold to businessman Émile Staub in 1970, who soon passed the control to his son, Eugênio, who remains at the head of the company.
The company was one of those that best benefited from the economic miracle of the 1970s, going public in 1974, taking advantage of the import restrictions imposed by the military government, gaining scale by producing the most varied electronic products, notably stereos, in its factories in the Manaus Free Trade Zone.
The situation began to change in the 1990s, with the opening of the economy during the Collor administration, when Gradiente found itself swallowed by the entry of electronic products from Asia. The company tried to diversify its production, betting on videogames, with a partnership with Nintendo, but never managed to get back on its feet.
After successive unsuccessful attempts at restructuring, Gradiente, then known as IGB Electronics, a maneuver made to avoid the company’s bankruptcy and subsequent loss of the brand, filed for protection from creditors in 2018, a process that has dragged on ever since.
Sought for comment, the company shared the notice of material fact sent to the market last week.
*By Felipe Laurence — São Paulo
Source: Valor International