CADE allows SAS to exercise some corporate control over the business affairs of Log-In until the case is adjudicated

On 15 December 2021, the Administrative Council for Economic Defense (CADE) authorised the firm SAS Shipping Agencies Services Sàrl (SAS) to exercise some corporate control over the business affairs of the firm Log-In Logística Intermodal (Log-In). The Tribunal of CADE issued this decision whilst the case is under analysis at the Office of the Superintendent General. Only afterwards it will be reviewed by the Tribunal. The request, granted to protect the investment of SAS, ensures the reversibility of the transaction and the competitive conditions of the affected markets.

The transaction, reported to CADE in October 2021, consists of the acquisition of Log-In by the SAS through a voluntary takeover. SAS is a wholly-owned subsidiary of MSC Mediterranean Shipping Company Holding that is specialised in liner agency services, container services, and logistics operations. Log-In is a logistics operator that provides short-sea shipping and ocean freight of cargo in general and operates the port terminal of Vila Velha in the Brazilian state of Espírito Santo.

SAS filed a request for CADE to allow it to exercise corporate control over the business affairs of Log-In to protect its investment and comply with the obligations provided by Brazilian Corporation Laws.

The Tribunal of CADE reached a unanimous decision to grant the request so that SAS can exercise some corporate control over Log-In. However, SAS must meet certain conditions until the Tribunal makes a final decision on the case or issues a decision that revokes the authorization granted.

Now, SAS is allowed to call a special meeting to appoint, immediately, a new member to the board of directors of Log-In. In this case, for the appointment to be valid, SAS must inform CADE of the names of at least three possible directors who must meet the criteria established in advance. Amongst their obligations, the appointed director must sign an agreement with CADE before taking office.

CADE also granted SAS the right of conveying and voting in general meetings, as provided by the Brazilian Corporation Law. These meetings are to be conveyed to discuss matters that have been settled by the authority and that change the regular course of Log-In's business and/or directly and negatively affect the full value of the investment of SAS.

The voting rights of SAS on the board of directors of Log-In, however, is limited to specific cases. The most relevant situations are the following: the appointment, removal or replacement of a member of the board of directors; specific amendments to the articles of incorporation; and ratification or amendments to the compensation plan based on the actions of Log-In that could result in shareholders’ dilution.

Conditions

The authorisation to exercise corporate control is conditional to SAS providing proof of the takeover and its ownership of a majority of Log-In voting shares that give it controlling interest. Moreover, all decisive meetings in which SAS take part within Log-In must be reported to CADE by the board member appointed by the company.

Another condition is that the performance of the board member appointed by SAS is subject to monitoring by the antitrust agency, being mandatory that said member submit monthly reports of their activities to CADE.

In case of failure to comply with the terms of the authorisation, whether due to SAS having exercised other rights not authorized by CADE or to the non-fulfilment of any of the established conditions, the party is to pay a daily fine of BRL 200,000.00.

According to the rapporteur of the case, Commissioner Luiz Hoffmann, the authorization to exercise corporate control is limited and must observe the exact terms and conditions established by the Tribunal of CADE.

‘In my view, the measures will mitigate the risks linked to the authorisation, ensuring the reversibility of the transaction and that the competition conditions of the affected markets remain the same until CADE issues a final decision on the case,’ stated Hoffmann.

Access Case no. 08700.005700/2021-48.