Brazilian equities and derivatives exchange Bovespa and the Brazilian Mercantile & Futures Exchange (BM&F) are planning to merge. Under the plans, the two firms will create a combined exchange group, provisionally called Nova Bolsa (New Exchange). The new exchange will trade the cash equities and equity derivatives previously traded on Bovespa, and the financial and commodity futures, spot market FX and securities trading previously transacted on BM&F.
The merged entity will be a public company, registered with the Brazilian Securities and Exchange Commission. Under the proposals, shares in the new entity will be distributed 50/50 between Bovespa and BM&F shareholders. In addition, Bovespa shareholders will receive BRL1,715 ($992.7) for each share they own – a total payout of BRL1.24 billion.
The new entity’s board of directors will comprise an equal number of the current board representatives of the two founding firms. A majority of the directors on the board will be independent. The boards of the two companies have also decided to set up a transition committee consisting of the chairmen and CEOs of both firms. This committee will be in place until 31 December 2008. The committee will appoint a chairman and CEO of the new company within 60 days of the transaction’s approval by each of the founding companies’ shareholders. Until these appointments are made, the two chairmen and CEOs will act as joint heads of the new firm.
The exchanges estimate the merger could result in a 25% cut in combined operating expenses by 2010. The transaction is subject to the approval of regulators and the shareholders of both firms.