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I would like to start saying that we confirm, as announced, the price of 35 reais per share which is inside the range that Rothschild appraised, so we basically confirm our previous announcement on price; but we changed an important condition on the offer which is the fact that we will only go through as long as we have two thirds of the free float shareholders registered in the offer agreeing with our offer.And we decided if we do not achieve this level of agreement among shareholders registered, we will keep the company in the Novo Mercado situation. This decision I think is an important decision and basically the decision among the requirement of many shareholders of Redecard to us that they would like to see Redecard staying in the Novo Mercado if we are not fully successful in our offer. I would like to exchange with you some of the views on the acquiring business and Redecard in particular, which are very important because especially here in Brazil I believe that many people do not understand exactly the fundamentals and the forces that move the pieces. As you know until the ‘80s Redecard did not exist; Credicard was a company that issued cards and had the acquiring powers in Brazil, the exclusivity already at that time. In ‘95, ‘97, Credicard was divided in three companies: Redecard itself, as we know, which was the acquiring business; Credicard, which was the issuer; and Orbital, the processor. The three businesses from then on started to move isolated although the shareholders of the three were the same. Redecard held the exclusivity for the MasterCard brand and this was an important competitive advantage that Redecard had throughout that period until last year (inaudible) 2010 when this was not anymore allowed in Brazil. So Redecard had this exclusivity on MasterCard brand and that made it for Redecard very easy to affiliate commerce and stores that were interested in doing business with Credicard, MasterCard holders. This was a very important thing and as long as you had in the market MasterCard cards issued Redecard would have a very solid business.
So at that time the business was about making the banks issuing MasterCard brand cards. This was the main objective of Redecard and having the cards on the market, the stores and the commerce in general would be very interested in having the cards accepted there and so it would be very easy to Redecard to affiliate those cards.In this environment for sure Redecard had a very strong pricing power because of the exclusivity; but then the company went to an IPO in July 2007 under these market conditions and by the way at that time a lot of comments were made during the offer about the risk of those things changing in the future. At the IPO itself, MasterCard sold its total stake in Redecard. In November 2008 or a little bit more than one year after the IPO, Itaú and Unibanco announced the merger. And in March 2009 Citi decided to sell its stake in Redecard and Itaú Unibanco decided to acquire only 6% of those in order to achieve the controlling shareholder – to be the controlling shareholder of Redecard. In July 2010, the end of the exclusivity was announced and so Redecard lost its exclusivity on the acquiring business of MasterCard brand which was not anymore exclusive of Redecard and this changed completely the business of acquiring because from then on merchants had the alternative of affiliating to different acquiring companies because any company could offer the MasterCard acquiring service and Redecard lost its exclusivity in the pricing power and, I would say, it lost at that moment the most valuable asset that it had and banks themselves could affiliate different acquiring companies for their clients. These events, I would say, redefined the balance of power within the value chain of the acquiring business. The power moved in part from the acquiring, which previously had the exclusivity on the brands – Redecard and one side, Cielo in the other side – it moved a little bit towards the banks that could, because of their relationship with the merchants in general, because of the offer of credit and other services, they had also the capacity to move the acquiring business from one acquiring company to the other because of this relationship that they have with the merchants in general. Read the rest of this transcript for free on seekingalpha.com