Material Fact – Conclusion of an Investment Contract

Material Fact – Conclusion of an Investment Contract


ALGAR TELECOM S/A (“Company”), pursuant to article 157, paragraph 4, of Law 6,404/1976, of December 15, 1976, as amended (“Brazilian Corporation Law”), under the terms and in accordance with CVM Instruction 358/02, of January 3, 2002, as amended (“CVM Instruction 358”), hereby announces to its shareholders and the market in general the following:

 

  1. On December 29, 2017, the Investment Agreement and Other Covenants (“Investment Agreement”) was entered into between Algar S.A. Empreendimentos e Participações (“Controlling Shareholder”) and Archy LLC, an associated company of GIC Special Investments Pte. LTD.(“Investor”). The Investment Agreement established the terms and conditions, subject to conditions precedent, for the Investor to become a shareholder of the Company, with a minority interest corresponding to approximately twenty-five percent (25%) of the Company’s total voting capital stock (“Transaction”).

 

  1. After complying with or waiver of all the conditions precedent set forth in the Investment Agreement, which include the approval by the Brazilian Antitrust Authority (CADE) and the National Agency of Telecommunications (ANATEL), the Transaction will be concluded through, among other acts:

 

  • The increase in the Company’s capital stock, within the authorized capital limit, in the amount between three hundred and fifty-two million reais (R$352,000,000.00) and three hundred and seventy-nine million, three hundred and thirteen thousand, seven hundred and seventy-seven reais and seventy-five centavos (R$379,313,777.75), represented by the issue between twenty-six million, two hundred and seventy-five thousand, five hundred and fifty-one (26,275,551) and twenty-eight million, three hundred and fourteen thousand, four hundred and twenty-eight (28,314,428) shares, at the issue price of around thirteen reais and forty centavos (R$13.40) per share (“Capital Increase”). Within the scope of the Capital Increase, the Controlling Shareholder will assign to the Investor its preemptive right for the subscription to new shares, including eventual unsubscribed shares, and, consequently, the Investor will subscribe to at least twenty-six million, two hundred and seventy-five thousand, five hundred and fifty-one (26,275,551) shares, at the total subscription price of three hundred and fifty-two million reais (R$352,000,000.00), which will be paid in cash on the closing date of the Transaction. Preemptive rights will be guaranteed to the other shareholders, in proportion to their respective interests in the capital stock, for the subscription to the new shares issued by the Company, pursuant to article 171 of Brazilian Corporation Law, with the partial approval of the Capital Increase being permitted;

 

  • The purchase, by the Investor, of forty-eight million, three hundred and seventy thousand, nine hundred and one (48,370,901) common shares held by the Controlling Shareholder, for the total price of six hundred and forty-eight million reais (R$648,000,000) (“Purchase and Sale”), with one installment being paid in cash and the remainder payable three (3) years after the closing date of the Transaction. The Purchase and Sale price is subject to the usual adjustments in similar transactions; and

 

  • The signature of the Company’s Shareholders’ Agreement by the Controlling Shareholder and the Investor, in addition to other agreements and documents related to the Transaction.

 

In light of the signature of the Investment Agreement, the Company hereby announces that it will not continue the processes of registering a public offering of its shares and converting its registration as an issuer of Company securities before the CVM from category “B” to category “A”, as disclosed in the Material Fact of October 16, 2017.

 

The Company will keep its shareholders and the market informed regarding the Transaction.

 

The Investor Relations department, represented by Luciana Paulo Ferreira and Érika Marques Andrade, is at your disposal for any additional clarifications through telephone, (11) 3512-7564 or (34) 3256-2978, and e-mail, ri@algartelecom.com.br or luciana@algartelecom.com.br.

 

Uberlândia – MG, January 2, 2018.

 

Jean Carlos Borges

Chief Executive Officer and Investor Relations Officer

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