Buffett-Backed StoneCo Scores Key Win in Battle for Linx

Payments processor StoneCo Ltd. has cleared a major hurdle for a 7.2 billion real ($1.4 billion) takeover of Brazilian software provider Linx SA.

Linx’s shareholders approved the transaction in a meeting held on Tuesday, according to three people familiar with the matter, who asked not to be identified because the decision is not yet public. Following months of negotiations that included governance backlash and a competing bid from a rival, Stone -- which counts Warren Buffett among its main backers -- sweetened its offer hours before the meeting, proposing 32.06 reais per Linx share in cash plus 0.0126774 Stone Class A common shares.

Linx said it will make an official statement after the meeting is concluded.

Competing bids

The stock-and-cash proposal sparked criticism from some of Linx’s minority holders, who questioned the incentives given to Linx’s founding trio -- Alberto Menache, Nercio Fernandes and Alon Dayan -- to accept Stone’s proposal, including the size of the non-compete compensation.

Linx competitor Totvs SA also made a proposal for the company. Its Chief Executive Officer Dennis Herszkowic, who had worked at Linx for more than a decade before leaving in 2018, slammed Stone’s bid for its governance issues in a recent conference call.

Totvs wanted its proposal to also be put to a vote and was hoping regulators would decide in favor of a shareholder’s request to suspend the meeting. Brazil’s securities regulator not only allowed the meeting to take place as scheduled, but also said Linx’s founders could vote on the transaction, which was previously barred.

The deal still needs to be approved by Brazilian antitrust regulator Cade.

©2020 Bloomberg L.P.

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