Case Study

Ultra Novo Mercado (A)

13 pages
August 2016
Reference: IMD-7-1779

Pedro Wongtschowski, CEO of Ultrapar, Brazil’s second largest oil and petrochemical company, was rethinking the company’s governance structure. At the annual general meeting, shareholders were scheduled to vote on a proposal to convert the firm’s non-voting shares into voting shares, on a one-to-one basis. This would eliminate the firm’s famous dual-class share structure. If approved, the company would become part of the Novo Mercado, Brazil’s stock market segment with the highest standards of corporate governance. And the transaction would turn Ultrapar into the largest Brazilian company without a defined controlling shareholder. This was an unprecedented move. The unification of shares would perhaps be good for future growth and professionalization, with all shareholders becoming partners with equal rights. But changing to a one-to-one basis without any premium to the controlling shareholders was unusual, and could be difficult to explain to the market. If approved, this Novo Mercado proposal would also imply that all shareholders would become partners with equal rights. Would this be the right time for such a move?

Learning Objective

The case shows how: a) corporate governance practices vary across countries, including environments in which there are dual-class shares; b) corporate governance ensures that managers maximize shareholder value and serve the company’s needs and strategy. It allows for a discussion of: the links between finance and strategy, the role of different types of shares, voting and non-voting, the implications of the one-share-one-vote and the transition to professional management in a family owned firm.

Mergers and Acquisitions, Value Creation, Voting, Capital Structure, Emerging Market
South America, Brazil
Ultrapar, Ipiranga Group, Materials, Oil and Gas
Published Sources
© 2016
Available Languages
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