Who Owns Cielo Company?

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Who Owns Cielo?

Cielo S.A., a major player in Brazilian payment solutions, has a history shaped by its founding partners and evolving public ownership. Understanding its ownership is key to grasping its market influence.

Initially formed in 1995 as VisaNet by Visa International and major Brazilian banks, Cielo's journey reflects significant shifts in its shareholder base over the years.

Who owns Cielo?

The ownership of Cielo S.A. has seen considerable evolution since its inception. Originally established in 1995 as Companhia Brasileira de Meios de Pagamento, or VisaNet, its foundation was a collaborative effort involving Visa International and prominent Brazilian financial institutions including Bradesco, Banco do Brasil, Banco Real, and Banco Nacional. This initial structure laid the groundwork for its expansion into Latin America's largest payment system company. The company's growth and market position, including its comprehensive Cielo Porter's Five Forces Analysis, are intrinsically linked to its ownership dynamics. Over time, especially following its IPO, the ownership structure has diversified, with significant portions of the company now held by public shareholders, alongside institutional investors and potentially strategic partners who influence its direction and operational strategies. This blend of founding stakeholders and a broad public float creates a complex governance framework.

Cielo S.A., originally established as Companhia Brasileira de Meios de Pagamento (VisaNet) in 1995, began as a significant joint venture. Its founding partners were Visa International and several prominent Brazilian financial institutions, including Bradesco, Banco do Brasil, Banco Real, and Banco Nacional.

Founding Vision The primary goal was to create a unified infrastructure for processing Visa card transactions across Brazil. Key Founding Banks Major Brazilian banks like Bradesco and Banco do Brasil were instrumental in its establishment. Consolidation of Processing This initiative aimed to replace fragmented, bank-specific payment processing systems with a single, efficient network. Early Ownership Structure The initial ownership was a collaborative effort, reflecting a shared strategic interest in modernizing payment infrastructure. Visa International's Role Visa International was a core founder, bringing its global payment network expertise to the Brazilian market. Strategic Partnership The formation of the company represented a strategic decision to build a robust and scalable payment processing platform.

The early ownership of Cielo was characterized by a consortium approach, uniting significant players in the Brazilian financial landscape. While the precise equity distribution among the founding entities is not publicly disclosed, the collective objective was clear: to establish a standardized and efficient payment processing system. This collaborative model was designed to leverage the strengths of each founding member to create a dominant force in the nascent electronic payments sector in Brazil, a move that would later influence the Target Market of Cielo.

Foundational Collaboration

Cielo's inception was a strategic alliance rather than a singular founder's initiative. This partnership aimed to pool resources and expertise.

• Visa International provided global payment processing knowledge.
• Major Brazilian banks contributed local market access and customer bases.
• The venture sought to create a unified payment infrastructure.
• This collective effort laid the groundwork for future growth and market leadership.

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Cielo's ownership journey began with its rebranding from VisaNet on July 1, 2010, marking a significant expansion in its processing capabilities. This pivotal moment was followed by its debut on the São Paulo Stock Exchange (B3) on June 29, 2010, as the third-largest IPO in Bovespa's history at that time.

As of September 30, 2024, Cielo S.A. has a total of 2,668,174,120 ordinary shares. The ownership landscape is dominated by two major Brazilian banks, Banco Bradesco and Banco do Brasil, through their respective holding entities. These institutions, along with their shared interest in Grupo Elopar, collectively held nearly 60% of Cielo's shares as of February 2024, indicating a substantial controlling stake. This concentration of ownership means these major institutional shareholders significantly influence the company's strategic direction and corporate governance.

Understanding Cielo's Major Stakeholders

Cielo's ownership structure is primarily concentrated in the hands of major Brazilian financial institutions. These entities play a crucial role in shaping the company's future.

• Banco Bradesco is a significant shareholder, holding 30.61% of ordinary shares.
• Banco do Brasil also maintains a substantial stake, owning 29.17% of ordinary shares.
• The combined holdings of these two banks, along with their associated companies, represent a controlling interest in Cielo.
• Cielo's commitment to high corporate governance standards, as mandated by its listing on the Novo Mercado segment, ensures transparency for all shareholders, including minority investors who benefit from 100% tag-along rights.
• Understanding the Revenue Streams & Business Model of Cielo is key to appreciating the influence of its major shareholders.

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Cielo S.A.'s Board of Directors is comprised of seven to twelve members, elected for two-year terms, with a mandate that at least 20% of the board must be independent directors. The roles of Chairman and CEO are distinct. As of April 30, 2024, the board composition reflects significant influence from major shareholders, particularly Banco do Brasil and Bradesco.

The voting power within Cielo is structured on a one-share-one-vote principle, as the company's capital is solely represented by common shares. This structure ensures that each common share carries equal voting rights in General Shareholders' Meetings, and the company is restricted from issuing preferred or founder's shares that could alter this balance. While there are no recent public disputes regarding proxy battles, the substantial holdings of Banco do Brasil and Bradesco, alongside a shareholders' agreement, suggest a unified approach to corporate decision-making among these key entities, solidifying their influence on Cielo ownership.

Understanding Cielo's Governance

Cielo's governance framework emphasizes independent oversight and clear separation of key executive roles. The influence of major shareholders is a significant factor in its ownership structure.

• Board members serve two-year terms.
• At least 20% of directors must be independent.
• The Chairman and CEO roles are separate.
• Banco do Brasil and Bradesco are key stakeholders.
• Voting power is based on common shares only.

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Cielo's ownership landscape has seen significant shifts in recent years, primarily driven by strategic actions from its controlling shareholders. These developments have reshaped its market presence and operational focus.

In February 2024, a significant move occurred when Banco do Brasil and Bradesco, through their joint holding company Grupo Elopar, announced a tender offer to acquire the remaining shares of Cielo, aiming to delist the company. This offer, priced at R$5.35 per share, represented a 6.4% premium and valued the potential privatization at up to R$5.90 billion. The primary motivation behind this initiative was to achieve greater integration with the core banking operations of Bradesco and Banco do Brasil, especially in light of increasing competition and market share erosion from rivals. The tender offer period, from July 10 to August 14, 2024, resulted in the acquisition of an additional 27.1% of shares by August 15, 2024, bringing the total ownership by the offerors to 93.4% of Cielo's issued share capital. This substantial increase in control led to a free float below 15%, consequently causing Cielo's removal from major indices like the FTSE All-World Index and the S&P Global BMI Index in August 2024. This trend mirrors previous actions by other major Brazilian banks, such as Santander's privatization of Getnet and Itaú's of Rede, indicating a broader industry consolidation where large financial institutions are seeking tighter control over their payment processing assets for enhanced efficiency and cost savings.

Controlling Shareholders

Banco do Brasil and Bradesco, via Grupo Elopar, are the primary entities driving Cielo's recent ownership changes.

Privatization Goal

The aim is to delist Cielo from the stock exchange for closer integration with banking operations.

Market Impact

The increased ownership has led to Cielo's removal from key global indices, reflecting its reduced public float.

Industry Trend

This move aligns with a broader trend of major Brazilian banks consolidating their payment processing assets, as seen with Santander and Itaú.

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