Wilson Sons S.A. (PORT3) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Wilson Sons Limited Conference Call. Today with us, we have Mr. Cezar Baiao, Deputy Chairman of the Board of Directors; Mr. Fernando Salek, CEO; and Ms. Fabricia de Souza, CFO; and Mr. Michael Connell, Investor Relations Officer. As a reminder, this conference is being recorded, and we will have simultaneous translation for those who wish to -- for those who wish to listen to the English version. [Operator Instructions] In line with the rules of physical isolation, the company is conducting this conference digitally, and the executives may take more time to respond compared to traditional conference calls. Before proceeding, we would like to mention that Page 2 of the presentation contains the usual forward-looking statements for your reference. Now I would like to turn the conference over to Mr. Fernando Salek.

Thank you. Good afternoon, everyone. I hope you are safe and well. Welcome to our conference call. In line with the strategy of maximizing value creation for all our stakeholders as per the material fact disclosed to the market yesterday, it is with great satisfaction that we inform you that the company's Board of Directors has approved the intention to implement a proposal to simplify and optimize our corporate structure. I'd like to start on Slide 6, which includes the main highlights of the proposed restructuring. The transaction consists of the Bermudian company merger into its Brazilian controlled subsidiary as well as the listing of Wilson Sons Holding Brazil on B3 in the Novo Mercado segment, the Brazilian Stock Exchange's premium listed segment. This simplification reinforces Wilson Sons' commitment to the best corporate governance practices and increases the company's visibility and value perception for all stakeholders. We also see several benefits that will be detailed throughout this presentation. Turning to Slide 7, please. Here, we present the group's current corporate structure. Wilson Sons Limited is our holding company based in Bermuda and currently registered with CVM as sponsor of our Brazilian Depositary Receipt program known by the acronym BDRs. WSL controls Wilson Sons Holdings Brazil, the current holding of our operating companies in the country. Now moving to Slide 8. On this slide, we present a step-by-step of the proposed restructuring. The transaction consists of the following steps. First, the downstream merger of WSL into its Brazilian controlled subsidiary as well as the registration of Wilson Sons Holdings Brazil with the CVM and the listing of its shares in the Novo Mercado segment of B3, noting that the admission to Novo Mercado will be conditional on the approval of the proposed restructuring by shareholders. If the restructuring is approved by the shareholders, all WSL shareholders and former BDR holders will receive shares of Wilson Sons Holdings Brazil listed on the Novo Mercado, in principle, at a ratio of 1 BDR sponsored by WSL to 1 share issued by Wilson Sons Holdings Brazil. It's important to highlight that the proposed restructuring does not imply the dilution of the current shareholders and BDR holders of Wilson Sons Limited. As a result of the merger, WSL shares and BDRs will cease to exist, and the company will be discontinued in Bermuda. We now move to Slide 9. Here, we present the group's simplified corporate structure following the completion of the transaction. After all the necessary approvals, the shares of Wilson Sons Holdings Brazil will be traded on B3 in the Novo Mercado segment. We believe that restructuring will bring important benefits to the group and all of our shareholders, among them are: the simplification and optimization of the group's corporate structure; the potential increase in stock liquidity; greater coverage of the stock by the main research analysts that follow our sector and the likely improvement of the company's access to capital markets, both for equity and debt operations, facilitating the development of our portfolio and new businesses. Moving on to Slide 10. I would like to emphasize that we believe the BDR market value does not reflect the intrinsic value of our assets. Compared to our local tiers, the BDRs have considerably less liquidity, which also results in a relative depreciated valuation. Just to illustrate in a theoretical exercise, if we consider the share turnover of some of our peers, we see significant potential to decrease the company's liquidity. We believe that the simplification of the structure should attract the interest of several institutional and retail investors who currently invest in our peers but have restrictions to invest in BDRs. We now move to Slide 11, please. Despite the company's solid financial performance, the lack of liquidity for BDRs has a significant impact on our market value when compared to our Brazilian infrastructure peers or the intrinsic values of our assets. The WSL enterprise value over EBITDA multiples are substantially lower than similar assets. And we see an opportunity for appreciation through the direct listing on the Novo Mercado. We now move to Slide 12, please. Here we present the indicative time line for implementing the proposed restructuring. The company estimates that the transaction will be completed in approximately 6 months. Completion is contingent upon the following steps and approvals: Bermudan Ministry of Finance Authorization for WSL to be merged into our Brazilian holding company, registration of Wilson Sons Holding Brazil with the CVM and conditional listing of its shares on B3 in the Novo Mercado. Once regulatory approvals are obtained, we will convene the respective special general meetings of the 2 companies for shareholder approval of the proposed restructuring. Once approved by the shareholders, the downstream merger of WSL into the Brazilian company can take place, exchange of WSL shares and BDRs for outstanding shares of Wilson Sons Holdings Brazil. And finally, extinction of the BDR program and cancellation of WSL registration with the CVM and B3 as a result of the merger into its controlled subsidiary. Therefore, we intend to achieve an important transformation of the company and potentially unlock value for all of our shareholders with a simplified and accessible corporate structure. This transaction reinforces Wilson Sons' commitment to the best corporate governance practices and increases the company's visibility and value perception for all stakeholders. This simplification is in line with Wilson Sons' bicentennial commitment to exercising its fundamental role in Brazil's development and competitiveness through the supply chains efficiency and optimization. Approximately 90% of Brazil's trade flow is shipped by maritime routes. And as the largest integrated provider of port and maritime logistics in the country, our solutions are vital for supplying the Brazilian population and the main domestic and international industries. The presentation ends here, and I would like to invite you to the questions-and-answer session. Thank you.

[Operator Instructions] Our first question comes from Mr. Lucas Marquiori from BTG Pactual.

But before I begin, congratulations on this. It's important to see the company making this decision. It was an old sort of pushback, right? So we believe that its Form D investors, it will be great to see the company evolving in this direction. So I have a couple of questions. First, if you could tell us a bit if your restructuring will change anything related to taxes? Since we're going to remove some of the structures, right, especially in Bermuda and Luxembourg, so will that lead to any changes in your taxes? Secondly, if you could tell us a bit about -- well, given that the company will go into Novo Mercado, we'd just like to know if there is still -- if there are still many adjustments and anything pending to adjust to Novo Mercado? And if so, what is still pending. So we just like to know what adjustments will still be made by the company. So those are my 2 questions.

Great. Lucas, I'm going to answer your first question or rather I'm going to pass it on to Fabricia Souza so that she can answer about any changes on tax issues. And I'll answer -- well, or I'll ask Michael Connell to answer your second question.

Lucas, so to answer your question on tax impacts, we had an in-depth analysis with our specialists and our consultants, and we don't expect any sort of relevant impact to our business right now, at least not on the tax side. We don't have -- we don't believe that's going to happen.

Lucas, just to add to what Fabricia said, we currently pay all of our taxes in Brazil. So this change will not have any impact of that nature and how we pay our taxes.

So Lucas, to answer your second question, as you've seen, the company has evolved in governance over the years. More recently, we approved the -- this committee, which was one of the last items so that we could comply to rules in Novo Mercado. And obviously, this is going to consolidate all of these changes so that we can really start in the new market, right? We're going to get a seal there, which is not available to BDR. But with the implementation of this operation in the next months, we may be recognized as a company that has good governance, right, besides implementing practices.

Great. And if you can tell us if there are going to be any changes to your Board structure?

This is Cezar Baiao.

Well, Cezar, would you like to answer?

Yes, I may. Lucas, our goal is really to use the same Board we have today in WSL. We have 2 independent Board members, who have been invited and who have accepted. These are important members from the new company listed in Brazil. So we intend to keep the same names.

Let's continue with a question that we got in writing. Lucas Facury asked, good afternoon. Congratulations. And I'd like to know if you're going to use interest on own capital after migration and if that would be more efficient on tax terms considering the company's net assets?

Thank you for your question, Lucas. I'm going to pass it on to Fabricia, so she can answer. Fabricia, I think you're still muted.

Sorry. I was on mute. Lucas, so to answer your question, the operation that we're proposing here aims to simplify the company's structure and to transfer our listing to the B3's Novo Mercado. Some devices such as interest on our own capital might offer us some more flexibility in the future, but this is not to go for this specific operation.

I'm going to ask one more question here that we received from Matheus from Ártica Investimentos. Good afternoon. Do you intend to contract any market buyer to increase liquidity after this operation?

Michael Connell, you can answer this one. Michael, you're also on mute.

That's right. I was, excuse me. So the company is going to analyze all the devices we can to increase liquidity, Matheus, but we have not made any decisions yet on what we are going to do. The company's intention is to increase liquidity.

The next question comes from Rob Byde from Zeus Capital. So let me translate this question. He's asking about any potential tax implications in this restructuring. Rob, thank you for your question. So as it has been said, I'd like to reiterate that, no. We had some studies with our assistants to make sure that there were not going to be any relevant tax impact on the company. I don't know if we have any other questions waiting. The next question will be asked by Lucas from BTG Pactual.

I don't mean to take a lot of time, but you compared yourself to some industry peers. And of course, we know that the effect on liquidity for the company has always been very good. So what kind of liquidity are you looking at inside the company? What sorts of volumes should we expect for Wilson Sons after its listed at -- in B3? I imagine it will be higher than what we have today, right? But we just like to understand how much.

Lucas, this is Fernando. We don't have any sort of projection of that nature, Lucas. We take into consideration the feedback that we've received over time on -- from our investors. And we're also looking at the signs that the BDR tool represented a hurdle on our way to having more liquidity. So based on that, we will go through this restructuring process, if it's approved. And then we hope to see positive impacts on share liquidities and the correction that it may bring as a consequence. But we don't have any projections or any guidance on how much liquidity we expect.

Great. And just to conclude, what is the rule that you have in these bylaws? Is it a simple majority? And do you have your minimum required to approve the reform?

Michael, you can answer that.

Sorry, Lucas, can you repeat that?

Yes, Lucas go ahead. So Lucas is asking about the approval process, if we need 2/3 or a simple majority? What is the threshold for approval with the shareholders?

Well, since it's an internal transition, we do require a simple majority for this transaction to be approved.

The next question will be asked by Bruno from 3G Radar.

Before I begin, I have to congratulate you for this operation. It's very good to see the company doing this, and I'm sure that it will generate a lot of long-term value for the company. It's going to improve our relationship with the capital market. So I'm sure that this will be a very good movement. Now a question on timing. I know that you still depend on some approvals, but I'd just like to understand if there's anything complex on the way that might generate delays. And if there are delays, what do you estimate will be the maximum term? So congratulations once again.

Thank you, Bruno. Michael, would you like to take that?

Sure. As we see in the presentation, there are many requirements to get this approved by the shareholders. The main one is approval by the CVM for listing Wilson Sons Holdings Brazil in the Novo Mercado segment of B3. This is something that we have to prepare. But it's all in our hands. The rules are very clear, and it's something that we can control. We have other conditions, which are out of our hands. We need to be approved by the Ministry of Finance in Bermuda. [indiscernible] recently had an operation stepping out of Bermuda and coming to Brazil, and we believe our operation will also be approved similarly in this initial stage by the Bermudan Ministry of Finance. Obviously, there's a final stage, which is being approved by shareholders, but we're confident that we will be supported by you, just as you said, Bruno. So thank you.

[Operator Instructions] The next question will be asked in English by Mr. Alex.

It's Alex Paterson from Peel Hunt. My question is separate to today's announcement. Do you think in the future that anything will happen that would increase the free float of Wilson Sons, or WSSA, in the future? For instance, might the exercise of options or anything else mean that, that free float increases?

Thank you for your question. So I'm going to repeat it in Portuguese before I answer it. The question was if we expect any future events where the free float will increase through any specific actions or through using options? You know we don't have any specific action to increase free float in this -- in the scope of this transaction. This transaction involves, as we said, the benefits that we mentioned during the presentation, but we are not foreseeing any sort of dilution or changes in our shareholder base right now. We understand that this transaction will put us at a better position for the future so that we can use the capital market more efficiently. And this is not even a question in our mind. There is a number of executives in the group who are coming close to their terms, and there could be some action there, but there's no other programmed event to increase free float right now. I'm not sure if anyone else has any comments to add. We received another question from Pedro Fisher from [ Charles Lera ]. Let me read it. Good afternoon. Will corporate costs will be reduced as the Bermudian Holding is extinguished? Well, I'm going to ask Fabricia to answer this question.

Pedro, yes, there will be some reduction in corporate costs, but it will not be significant. We expect a slight reduction, but I wouldn't say that it's significant. This is not the aim of this operation. This is just a beneficial side effect even though it's not so significant in terms of value.

[Operator Instructions] This concludes our question-and-answer session. We'd now like to give the floor to Mr. Fernando Salek for his closing remarks.

Thank you. I'd just like to reiterate that we are satisfied to bring you this operation. We believe that it includes a very good value proposition. And from now on, we're going to focus on working hard so that we can execute this and go through all of the approval steps required so that by the end of October, we can be in Novo Mercado. I wish you all health and thank you.

This concludes Wilson Sons Conference Call. Thank you for participating and have a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]