Lupatech S.A. (LUPAY: OTC Link) | Material Fact: Lupatech announces the Strengthening of the Capital Structure and the Acceleration of the Business Plan in Services for Oil and Gas


Material Fact: Lupatech announces the Strengthening of the Capital Structure and the Acceleration of the Business Plan in Services for Oil and Gas

Dec 29, 2011

OTC Disclosure News Service

Sao Paulo, Brazil –


Lupatech announces the Strengthening of the CapitalStructure and the Acceleration of the Business Plan in Services for Oil and Gas

Caxias do Sul, December 29, 2011LupatechS.A. (BMFBOVESPA: LUPA3) (OTCQX: LUPAY) (Lupatech FinanceLTD 97/8 Perpetual Bonds: ISIN USG57058AA01) (“Lupatech” or“Company”), leadingBrazilian supplier of manufactured products and services for the oil and gassector, pursuant to CVM Instruction 358 of January 3, 2002, as amended, herebyinforms its shareholders and the market the following:

In the scope of the restructuring process of the Companyinitiated in 2011 and in course currently, comprising the reorganization ofoperational areas, sale of non strategic assets and the balance of its capitalstructure, a new step to the strengthening of the Company has started.

The Company has sought to balance its capital structureand improve its governance, besides increasing its exposure to the oil and gasservices sector, a strategy that has been followed in the last four years.

In this context, considering the great opportunity ofaccelerating the business plan in services for oil and gas and its capitalneeds, the Company and LUPAPAR Negócios e Empreendimentos Ltda. (“LUPAPAR”), havesigned a Memorandum of Understanding(“MOU”) with BNDES ParticipaçõesS.A. – BNDESPAR (“BNDESPAR”), Fundação Petrobras de Seguridade SocialPetros (“Petros”), GP Investments Ltd(“GP”) and San Antonio Internacional(“SAI”), which foresee the intention of the parts related to the following:


(i)           Execution, by the Company,of a capital increase through a privatesubscription (“Capital Increase”), under the limit of the authorizedcapital, in the amount of up to R$700,000,000.00(seven hundred million reais);


(ii)          Subscriptionand payment by BNDESPAR and Petros of the CapitalIncrease, in cash, in the joint amount of up to R$300,000,000.00 (three hundred million reais) considering certainconditions, notedly the satisfactory result of the legal, accounting andfinancial due diligence process in the Company and in San Antonio Brasil, andthe celebration of an Investment Agreement, as per defined on items (iv) and(vi), besides observing the limits and prohibitions included in the applicable laws.The BNDESPAR can consider subscribing the Capital Increase using creditsarising from debentures, provided that it is guaranteed resources for theCompany in the Capital Increase, in cash, in the minimum amount ofR$350,000,00.00 (three hundred and fifty million reais);

(iii)         Subscriptionand payment by GP, which manages theinvestment funds that are indirect controllers of San Antonio Internacional andindirectly of its subsidiaries with operations in Brazil as San AntonioInternacional do Brasil Serviços de Petróleo Ltda., Prest Perfurações Ltda. andSotep Sociedade Técnica de Perfuração S.A. (jointly “San Antonio Brasil”), ofthe Capital Increase, in cash, in the minimumamount of R$50,000,000.00 (fifty million reais), considering certainconditions, notedly the Incorporation and the celebration of the InvestmentAgreement, as per defined on items (iv) and (vi) below;

(iv)         Incorporationby Lupatech of San Antonio Brasil,increasing significantly its oil and gas services offering (“Incorporation”).The Incorporation is subject to the usual precedent conditions in this type oftransaction, among them the satisfactory result of the legal, accounting andfinancial due diligence process;


(v)          The intention of BNDESPAR, Petros and GP in promoting (i) a restructuring of the Board of Directorsof the Company, which should be composed in its majority by independentmembers; and (ii) the acceleration ofthe strengthening of the operational management, always using marketprofessionals with incontestable technical capability and experience;


(vi)         Thecelebration of an Investment Agreement(“Investment Agreement”) in the tenor of up to 45 (forty five) days, providedthat some conditions are complied.


Aboutthe Capital Increase


The issue priceof the shares object of the Capital Increase will be R$4.00 (four reais) per share, fixed with a discount of approximately 18.8% (eighteen point eight per cent) inrelation to the weighted average price of the common shares issued by theCompany in the last 20 trading sessions prior to the date of 12/26/2011,pursuant to item III of paragraph 1 of article 170 of Law 6,404/76, as amended,which seeks to encourage the participation of shareholders in the CapitalIncrease and of the market in general in the subscription of occasionalremaining shares. The Capital Increase can be homologated partially, providedthat it is reached the minimum amount of R$350,000,000.00 (three hundred andfifty million reais).


The shareholders of the Company on the date of the approvalof the Capital Increase will have the preference right for the subscription ofthe new shares to be issued, based in the proportion of the number of sharesthat they hold in such date.


TheCompany would like to inform also that soon it will be called a GeneralShareholders Meeting to deliberate, among others, the following subjects:


(i)   dismissthe compliance to the obligation of holding a public offering of shares(“OPA”), pursuant to article 49 of the Company’s Bylaws (clause of protectionof dispersion of shareholder base (poison pill) to allow the investments ofBNDESPAR, Petros and GP above referred; and


(ii)  increasethe limit of the authorized capital set forth on paragraph 1 of article 5 ofthe Company’s Bylaws in the amount of share compatible to the Capital Increasehereby announced.


Aboutthe Incorporation


The operations of San Antonio Brasil are divided in twobusiness lines: (i) drilling rigs and workover, and (ii) intervention and wellservices. San Antonio Brasil has presented in the past years, important growthin Brazil having currently around R$1.6 billion in firm orders (backlog).


The combination of the businesses of the Company and SanAntonio Brasil will allow the increase in intervention services lines of Lupatech,which should consolidate itself as the largestBrazilian services company of the oil and gas chain, with a portfolioequivalent in amplitude to the “Big Four” (four largest international companiesin the sector). Besides that, the Company will accelerate its development inservices in Brazil incorporating contracts already active. In addition to theindustrial units of the Company in Argentina and intervention servicesoperations in Colombia, the combination of these businesses reinforce thepositioning of the Company in the oil and gas products and services chain.


The definition of the exchange relation between theshares issued by the Company and the ones issued by San Antonio Brasil shall beapproved by the respective Board of Directors of the companies involved,subsequently to the execution of the legal, accounting and financial duediligence process.


Notwithstanding the above, for the definition of theexchange relation, the Company and San Antonio Brasil have reached thefollowing indicative amounts:

·        Equity value of the Company: issue price ofthe Capital Increase (R$4.00/share) applied to the shareholding base on thedate of the approval of the Capital Increase; and

·        Value of San Antonio Brasil: R$150,000,000.00 (one hundred and fiftymillion reais) of Enterprise Value, being R$100,000,000.00 (one hundred millionreais) in debt, to be structured in a satisfactory manner between the parts,and an equity value of R$50,000,000.00 (fifty million reais).


The operations described in the Material Fact constituteone more fundamental step in the future course of the Company, optimizing itscapital structure and acceleration its business plan. The Company willintensify its restructuring process, focusing in profitability, in the captureof operational and costs synergies and improvement of the management model,supported by specialized consulting companies in these processes.


The operations above described are subject to theapproval of the competent bodies. Additional information about the CapitalIncrease, when approved, will be published to the market through a ShareholdersNotice.


The Company calls its shareholders and the market ingeneral for a conference call to detail and clarify the operations belowpresented on January 3rd, 2012, at 11:30 a.m. (Brasília time) on thetelephone +55 (11) 3127-4971 code: Lupatech.


Lupatech, through itsInvestor Relations Department, is available for any clarifications through thecontacts below.


InvestorRelations – Contacts


AlexandreMonteiro – CEO                                                      CynthiaBurin – Investor Relations

Telephone:+55 (11) 2134-7000 or +55 (11) 2134-7088                   E-mail:

The above news release has been provided by the above company via the OTC Disclosure and News Service. Issuers of news releases and not OTC Markets Group Inc. are solely responsible for the accuracy of such news releases.

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