Benzinga | Feb 1, 2021 07:06AM EST

XP Inc. Agrees tTo Terms With Ita In Connection With Ita's Spin-Off Of Its Investment in XP

XP Inc. (NASDAQ:XP), a leading, technology-driven platform and a trusted provider of low-fee financial products and services in Brazil, announced today, following the press release issued on November 27, 2020, that it has entered into two agreements as the consenting party in connection with the spin-off by Ita? Unibanco Holding S.A. of its investment in XP through the corporate reorganization announced by Ita? Unibanco Holding S.A. on December 31, 2020 (the "Corporate Reorganization"). The first agreement (the "IU Conglomerate Agreement") was entered into with Ita? Unibanco Holding S.A., Ita? Unibanco S.A. and ITB Holding Brasil Participa??es Ltda. (collectively, the "IU Conglomerate"), XP Controle Participa??es S.A. ("XPC") and General Atlantic (XP) Bermuda, LP ("GA"). The second agreement (the "IUPAR Block Agreement," and together with the IU Conglomerate Agreement, the "Ita? Agreements") was entered into with Ita?sa S.A., IUPAR Ita? Unibanco Participa??es S.A. (collectively, the "IUPAR Block"), XPC and GA. The Ita? Agreements establish certain steps to be taken as a result of the corporate reorganization approved and announced by Ita?sa S.A. on January 31, 2021 (the "Corporate Reorganization"), the implementation of which is subject only to the Federal Reserve Board's (FED) approval.

Pursuant to the IU Conglomerate Agreement, certain changes to the XP Shareholders' Agreement have been agreed, including, among others: (i) the possibility of partial private sales of XP shares by the IU Conglomerate, subject to certain conditions; (ii) end of the lock-up provision for a sale by XPC of XP shares resulting in a change of control of XP; (iii) changes to the tag along provision, which will be limited solely to a sale of XP shares resulting in a change of control of XP; (iv) elimination of all the veto rights of the IU Conglomerate; (v) elimination of the right of the IU Conglomerate to appoint members to the XP Board of Directors and to any XP committee, as well as the elimination of its right to appoint the XP internal auditor; (vi) elimination of the IU Conglomerate's right to receive certain XP information. In addition, the XP Shareholders' Agreement will expire on October 30, 2026. The foregoing changes will become effective upon implementation of the Corporate Reorganization.

As provided for in the IUPAR Block Agreement the parties have agreed as follows: (i) the parties have undertaken to take all necessary actions to allow XP to merge XPart S.A. ("XPart"), a new company formed by the IUPAR Block, into XP, as a result of the Corporate Reorganization, so that XPart shareholders will receive, as a result of the merger into XP, Class A shares of XP, directly or in the form of Brazilian depositary receipts - BDRs, with the parties also agreeing to use their best efforts to complete the merger of XPart into XP within 120 days from the date hereof; (ii) upon implementation of the Corporate Reorganization and until it is merged into XP, XPart will become party to the XP Shareholders' Agreement, with the same rights and obligations previously held by the IU Conglomerate; (iii) upon the merger of XP Part into XP, the IUPAR Block will accede to the XP Shareholders' Agreement, and will have the same rights and obligations of the IU Conglomerate described above, except for (a) the right to nominate two members to XP's Board of Directors (one of which will serve on XP's audit committee), as long as the IUPAR Block holds shares issued by XP representing at least 5% of XP's total share capital, and (b) the right to receive certain information about XP for investment monitoring purposes; and (iv) notwithstanding the foregoing, the IUPAR Block will be subject to a lock-up agreement pursuant to which it cannot sell its XP shares to any third party until October 30, 2021.

XP believes that the obligations agreed to by its controlling shareholders pursuant to the Ita? Agreements will enhance its corporate governance structure and contribute to improve its capital structure and leverage capacity, so that the controlling shareholders of XP and GA would be the only holders of Class B shares of XP, which carry supervoting rights.